BUKIT LANJAN: When putting a decent meal on the dining table daily for loved ones becomes desperate for Malaysians …

 BUKIT LANJAN: When putting a decent meal on the dining table daily for loved ones becomes desperate for Malaysians …

The Bloomberg business news report posted by The Star Online titled “Lack of deposits worrying banks” must not be taken lightly by Malaysians and Malaysia.

If the report is accurate, then Malaysians and Malaysia must start worrying and do something about their financial woes.

“It only shows Malaysians are running out of spare cash and are therefore contributing less to to savings and deposits into commercial banks,” Gerakan Deputy Speaker Syed Abdul Razak Alsagoff said.

He said Malaysians certainly can most certainly do something about it by tightening their belts and spending prudently.

“Buy only what is necessary, buy only what you need. All other luxuries can be put on hold until better times. Boycott the profiteers.

“This way, they not only spend less and save for the rainy day, they will also force profiteers to reduce prices, thus help cut down inflation,” he added.

Syed Razak, who is Gerakan’s nominee to contest N.37 Bukit Lanjan in the coming 14th General Election (GE14), said the Bloomberg report showed:

> Malaysians are digging into their savings to make ends meet; and

> The spending power of Malaysians are fast weakening.

“I dread to imagine what will happen when Malaysians run out of cash or savings to make ends meet daily. When putting a decent meal on the dining table for their loved ones become desperate,” he added.

This was what Bloomberg reported:

"Business News
Home > Business > Business News
Friday, 11 August 2017 | MYT 1:28 PM

Lack of deposits worrying banks

SOMETHING weird is going on at Malaysia's banks.

The problem is about deposits, or more precisely, a lack of them.

As CIMB Group Holdings Bhd. analyst Winson Ng notes, the banking industry's loans-to-deposit ratio has gone from 76 percent in February 2012 to 90 percent in June.

For Malayan Banking Bhd., or Maybank, the ratio is approaching 101 percent, a level last briefly seen in 2006, according to data compiled by Bloomberg.

Maybank may be the canary in the coalmine.

The largest Malaysian lender controls 26 percent of the $411 billion the country's publicly traded financial institutions have in deposits.

For almost three decades, Maybank's loans and deposits have both grown at a compounded annual rate of 13 percent.

In the past five years, however, deposit growth has slowed to 9 percent, while loans are still expanding at 11 percent. That gap of 2 percentage points is pushing up funding costs.

Large Malaysian banks -- Maybank, Public Bank Bhd., CIMB and Hong Leong Bank Bhd. -- are now earning a net interest spread of less than 2 percent, which puts them in the ranks of emerging Asia's least profitable lenders.

With deposits getting squeezed, listed Malaysian banks and their subsidiaries have raised $6.4 billion from fixed-income markets this year, the most since 2014. Less than half of it is in ringgit, though.

The growing reliance on foreign-currency debt is disadvantageous. Borrowing three-month money in the local interbank market, and using those funds to buy dollars for the same period, costs Malaysia's lenders 1.9 percent, an 60-basis-point spread over Libor.

In Asia, this premium for short-term dollar funding is stiffer only for Indonesian banks. Unlike their Malaysian peers, however, the Indonesians have plenty of margin headroom.

It's unnatural for loan writing to run ahead of deposit taking for so long.

A similar surge in Indian banks' loans-to-deposit ratios between 2008 and 2014 coincided, initially, with abysmal interest spreads.

To boost the latter, lenders threw money at any large company that showed up with a semi-cooked proposal. The cycle ended, predictably, with a blowout in non-performing assets.

Big Malaysian firms aren't as reliant on banks for funding, which has helped contain system-wide bad loans at 1.65 percent.

However, if banks keep paying more for deposits, they'll have to accept riskier borrowers. The longer it goes on, the more sinister the deposit crunch may become. - Bloomberg



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