EXCESS capital buffers stood at RM142.3bil as at end-July 2023, while the Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios remain stable at 15.1%, 15.6% and 18.8%, respectively, well above the Basel III minimum regulatory levels 2.
Lenders continued to maintain sufficient liquidity with a healthy liquidity coverage ratio of 154.8% and supportive of credit intermediation activities with a stable aggregate loan-to-fund ratio of 82%.
The banking sector maintained prudent lending activities during the first seven months of 2023. For that period, the expansion in total loan outstanding moderated by 4.2% year-on-year (y-o-y) to RM2.1 trillion mainly due to the slower growth in the business segment.
On the household front, financial assets totalled RM3 trillion as at the end of June and exceeded total household debt by 2.05 times.
With improvements in income and employment conditions, most borrowers have exited the repayment assistance programme and resumed loan payments. These developments will augur well for household financial position.
At the same time, the formulation of the Consumer Credit Act non-bank credit providers and credit service providers offering credit products or credit services and management agencies will be subjected to authorisation, governance and proper conduct requirements.
These measures are expected to strengthen consumer protection in Malaysia and heighten the level of professionalism within the industry.
Gross funds raised in the capital market during the first seven months of 2023 rose by a commendable 11.4% y-o-y to RM184.1bil, attributable to increased fundraising activities by the public and private sectors, which grew by 10.8% and 12.4% to RM114bil and RM70.1bil, respectively.
The private sector's gross funds raised grew by 11.8% y-o-y to RM67.1bil despite the tighter financing environment, while at the same time funds raised via the domestic equity market during the period were recorded at RM2.9bil.
For the public sector, Malaysian Government Securities (MGS) issuances increased by 8.3% y-o-y to RM57.4bil, while Malaysian Government Investment Issues (MGII) increased by 13.5% y-o-y to RM56.6bil.
The outlook for MGS, MGII, as well as corporate bonds and sukuk, remains positive, buoyed by expectations of sustained economic growth and the anticipated conclusion of Bank Negara’s rate hiking cycle this year.
In the meantime, the local equity market was affected throughout the first eight months of 2023 by external challenges, including uncertainties surrounding global economic growth which dampened investor sentiment.
In July, the government reduced the stamp duty rate on shares traded on Bursa Malaysia from 0.15% to 0.1% as one of the measures to reinvigorate the domestic capital market.
Perhaps as a consequence, the FBM KLCI recovered, and coupled with the launching of the Madani Economy framework, supported by foreign buying interest and impending policy announcements, the index rose and closed notably at 1,462.03 points on Aug 9.
Subsequently, improved local job openings data and stimulus measures announced by China also helped uplift the local index.
As at end-July 2023, the total assets of Islamic banking expanded by 8.1% to RM1.3 trillion, accounting for 36.4% of the market share. Meanwhile, the total Islamic financing outstanding grew by 9.1% y-o-y to RM844.1bil as at end-July.
The outlook for Islamic banking remains promising, supported by a mature ecosystem that promotes social and financial inclusion.
The announcement of two Islamic digital banks in 2022 and intensification of digitalisation efforts undertaken by existing Islamic banks will further enhance access to affordable and quality financial solutions, particularly for the underserved and unserved market segments.
Social finance is also envisioned to play a greater role in complementing public sector finance, commercially-driven financial solutions and corporate social responsibility activities of financial institutions to promote greater social resilience.
For example, social finance programme iTEKAD has expanded to include 11 participating banks, onboarding over 3,000 participants while mobilising over RM40mil of diverse social finance funds in 2023.
The Islamic Capital Market (ICM) continues to lead Malaysia's capital market in fundraising and investing. As at end-July, the domestic size of ICM was valued at RM2.4 trillion, accounting for 64.4% of total capital market size.
Furthermore, the size of ICM increased further by 7.9% with the sukuk market becoming more attractive to investors.
Despite near-term volatility, the medium-to-long-term outlook for global sukuk is expected to be positive amid sustained Islamic investors' demand, issuer refinancing needs, and government support in core markets.
As at end-July 2023, a total of 807 or 81.8% out of the total of 987 public listed companies are syariah-compliant. The market capitalisation of syariah-compliant securities stood at RM1.1 trillion or 65.1% of the overall total market capitalisation of listed companies on Bursa Malaysia.
