Posted on 26 Mar 2010
THE household sector sailed through 2009 drawing on strong financial buffers accumulated over several years.
Households adopted a cautious attitude towards spending in the first half on concerns on the direction of the domestic economy and employment prospects.
Consumer sentiments in early 2009 reached a low level before the sharp turnaround in the second half in line with more visible signs of improvement in the macroeconomic environment and employment outlook.
Total household debt expanded by 9.4% to RM516.6bil or 76.6% of GDP (2008: RM472.1bil or 63.9% of GDP) as at end-2009.
Almost half of household debts were in long-term secured borrowings to fund house acquisitions (2009: 46.2%). This resulted in the gradual increase in total household debt-to-personal disposable income from 114.9% in January 2009 to 136% in December 2009.
The volume of personal financing and outstanding credit card balances also picked up in the second half, expanding at an annual rate of 17.6% to RM98.8bil at the close of the year. Personal financing expanded strongly at 22.9% in 2009 to account for 14% (2008: 12.4%) of household debt.
Credit card balances grew by 5.4% to RM26.7bil mainly for consumption and retail purchases under the various flexible payment schemes offered by many card issuers.
Despite the continued growth in debt level, households were strong enough to tolerate adverse shocks. The level of financial assets expanded strongly on an aggregate basis by 19.3%, driven mainly by the higher investment valuation for equity and unit trusts.
As at end-2009, household financial assets were slightly higher at 2.5 times of total household debt (2008: 2.3 times), providing households with adequate flexibility to adjust to the demands of the challenging economic environment.
Household liquid assets remained ample with the ratio of liquid assets-to-debts at a comfortable level of 148.6% (2008:138.5%). Liquid assets accounted for 60.3% of household financial assets as at end-2009.
The impact of the economic slowdown was more felt by certain segments which began to fall behind in monthly debt repayments.
A total of RM13.2bil of household debt with the banking system turned non-performing in 2009. The overall quality of household debts, however, continued to remain high with low non-performing loans ratio of 3.1% against 4.1% as at end-2008.
Malaysian businesses, armed with financial buffers built over the years, confronted significant challenges in 2009 amid slowing business environment and declining consumer confidence.
During the first half, the performance of the 170 companies tracked by Bank Negara (representing 86.2% of
Improvements in operational productivity and efficiency that had taken place in prior years enabled businesses to brace against earnings erosion in the first half of 2009 and effectively preserved the strength of the balance sheets.
Such measures, coupled with the economic recovery in the second half, led to stronger financials that preserved the debt servicing capacity of businesses, as measured by the interest coverage ratio (ICR) throughout 2009.
Although the level of ICR for some industries moderated, strong balance sheets and accumulation of retained earnings cushioned the impact of the slowdown and underscored their sustained debt servicing capacity.
This was further reinforced by the absence of a surge in bankruptcies and delinquencies. NPLs remained steady with NPL ratio of 4.7% as at year-end, the lowest level observed since the 1998 Asian financial crisis.
Access to financing for large businesses and SMEs via the banking system was favourable throughout the year totalling RM127.6bil with stable rates of loan approvals.
Earnings before interest and tax recorded steady improvement beginning the second quarter as business activities revived due mainly to restocking activities and the aggressive measures taken in the early part of the year to protect the balance sheet.
Malaysian corporations fared better in the second half of 2009 following the global economic recovery, particularly in
Improved consumer sentiment leading to relatively higher consumer spending and local demand bolstered the recovery of Malaysian business activities.
Profitability and debt repayment capacity in the second half strengthened. Financing approval-to-application ratio for large businesses moderated in the first half year but recovered to 64.7% in the second half in tandem with the economic recovery.
Consequently, loans disbursed by the banking system to large businesses increased by 5.3% in 2009 to RM249.4bil.
