Malaysian banks' loan-to-deposit ratio shows signs of an 'anomaly'

The ratio dipped to 87.7% despite contraction in deposits.

According to Maybank Kim Eng, despite the contraction in deposits, the industry’s loan/deposit ratio (LDR) dipped further to 87.7% end-Mar 2016 from 88.0% end-Feb 2016, which is a bit of an anomaly. This is especially since the loan/fund ratio notched up slightly to 82.4% from 82.3% end-Feb 2016 while the loan/fund and equity ratio also rose marginally to 73.9% from 73.8%.

"In computing the LDR, deposits exclude interbank deposits while loans exclude loans sold to Cagamas and interbank loans. Loans also exclude financing funded by Islamic Investment Accounts. As such, one possible reason for the lower LDR despite the contraction in deposits could be a lumpy sale of loans to Cagamas, though further clarification is required."

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