Is your wallet getting lighter and lighter?

A think tank sees larger loan-to-deposit ratios in banks as indicating that Malaysians are finding it harder to save money.

Azrul says the higher loan-to-deposit ratios could also mean Malaysians were saving their money elsewhere.

PETALING JAYA: The Institute for Democracy and Economic Affairs (Ideas) has voiced concern that the average Malaysian may be in a worse financial strain that previously thought.

Referring to a recent Bloomberg report that the loan-to-deposit ratios in the nation’s banks are at an all-time high, Ideas external relations manager Azrul Khalib said this could indicate that disposable incomes were decreasing and Malaysians therefore had less to save.

“It is worrying to be in a situation where a bank’s total loans are larger than its total deposits,” he said.

“Those in the lower income group – due to high debt levels, low purchasing power and increasing costs of living — spend most of their income and have little savings, making them susceptible to financial stress should interest rates and inflation continue to rise.”

The Bloomberg report quoted CIMB Group Holdings Bhd analyst Winson Ng as saying that the banking industry’s loan-to-deposit ratio had gone from 76% in February 2012 to 90% last June.

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

Azrul said Khazanah Research Institute’s State of Households II report last year also noted that despite an overall increase in the median monthly household income, “more than 50% of the country’s urban households did not have any savings.”

“Malaysian household savings stood at 1.5% of adjusted disposable income in 2014, which is extremely low,” he said.

He conceded, however, that the higher loan-to-deposit ratios could also indicate that Malaysians were saving their money elsewhere.

“It could be an indicator that banks, with their very low interest rates, are no longer the preferred destination for savings.

“The trend could be that Malaysians are increasingly depositing their money in mutual funds or stocks, retirement funds, and other financial products which promise better yields and better returns on investments.”

Tariq: How do you survive when you’re already heavily in debt?

PPBM supreme council member Tariq Ismail Abdul Rahman has also commented on the Bloomberg report.

In a statement issued to the media, Tariq said the situation could be due to withdrawals of money from the banks for a variety of reasons. One of the reasons could be the simple need for cash, he added.

“Though the article posits the cause as due to the interest rate spread, the truth is that deposits have been dropping due to these major concerns – a massive withdrawal of large deposits from Malaysian banks due to a lack of confidence following the 1MDB scandal, the lack of confidence in the ringgit, and more importantly the massive increase in the cost of living,” he said.

He alleged that the Putrajaya administration had been brushing aside these concerns every time they were raised.

He warned that such an attitude would weaken the country’s ability to withstand an approaching financial crisis.

“How do you survive when you’re already heavily in debt? I hope the relevant authorities will put their ego aside and start managing this risk now. To wait any further is to court disaster.” - FMT