KUALA LUMPUR: Deposits in the banking system grew at a slower pace of 3 per cent in the second half of 2024 (2H 2024), weighed down by muted inflows from resident businesses due to higher costs and debt repayments.
Bank Negara Malaysia (BNM), in its Financial Stability Review for 2H 2024, said business deposits saw marginal year-on-year growth of just 0.1 per cent, a steep drop from 7.5 per cent in June.
Seasonal competition for deposits picked up toward year-end as banks shored up liquidity ahead of large withdrawals.
Corporate deposit rates rose in the fourth quarter but were offset by falling retail fixed deposit rates, as banks moved to manage funding costs.
BNM noted a decline in the average cost of money market funds (3.77 per cent in December vs. 3.92 per cent a year earlier) following global rate cuts. This helped bring down banks’ average cost of funds to 2.78 per cent in December, from 2.90 per cent in June.
Credit conditions remained supportive, with loan growth holding steady at 5.5 per cent, down slightly from 6.4 per cent in June.
Banks’ liquidity and funding positions remained solid, with the liquidity coverage ratio at 160.7 per cent and net stable funding ratio at 116.3 per cent as of end-December. High-quality liquid assets stood at RM761.1 billion, mostly in central bank placements and government bonds.
External debt was stable at RM445.2 billion, mainly from interbank borrowings. Over half of these were intra-group exposures, especially among foreign banks sourcing funds from their parent companies abroad or Labuan-based institutions managing cross-border transactions.
Banks also reduced their net open FX positions to 3.9 per cent of total capital (June: 5.2 per cent) to limit risk amid heightened market volatility.
Profitability held up, supported by strong loan growth and improved net interest margins (2.0 per cent in December vs. 1.96 per cent in June). The banking system’s total capital ratio stood at 18.3 per cent, with RM136.8 billion in capital buffers.
“These buffers help ensure banks can continue supporting credit flows and absorb potential shocks,” BNM said, noting the buffers were further reinforced by revaluation gains on bond holdings amid a dip in domestic yields.
– BERNAMA
