RAM Ratings has reaffirmed its stable outlook for the Malaysian banking sector this year, in stating most banks with their sound credit metrics can withstand economic challenges.
In a statement, the credit rating agency said in line with the revised Gross Domestic Product growth forecast of 4.4% this year, it expects the sector's loan growth to ease to six per cent from 7.9% in 2015, according to Malaysia's (Bernama) News Agency.
Co-Head of Financial Institution Ratings Sophia Lee said the system's gross impaired-loan (GIL) ratio is projected at 2.0% at year-end and still healthy, although higher than the current historical low of 1.6%.
"The projected uptick in GILs is also expected to be broad-based.
"The high level of household debt is still a concern, especially for the low-income group, and in an environment of rising job cuts and the escalating cost of living.
"While we expect some weakening in the credit quality of household financing, the deterioration should not be significant, given still-accommodative interest rates," she added.
As at end-January 2016, the household sector's GIL ratio remained low at 1.1%, with banks having generally maintained prudent underwriting standards for the sector