SME loans among pos­i­tives that kept bank­ing sec­tor on firm ground, says HLIB

New Straits Times - - Business -

KUALA LUMPUR: The bank­ing sec­tor has am­ple liq­uid­ity and has ben­e­fited from reg­u­la­tions on cap­i­tal man­age­ment, said HLIB Re­search yes­ter­day in its “In­dus­try In­sight” re­port on bank­ing.

On Bank Ne­gara Malaysia’s 2016 An­nual Re­port that was re­leased on Thurs­day, the re­search house said de­spite the chal­lenges faced last year, pos­i­tives such as small and medium en­ter­prise (SME) loans, the cool­ing down of house­hold debts and an in­creased use of tech­nol­ogy by banks kept the bank­ing sec­tor on firm ground.

“All in, the bank­ing sec­tor de­liv­ered sat­is­fac­tory per­for­mance de­spite gross do­mes­tic prod­uct (GDP) growth mod­er­a­tion with oil and for­eign ex­change shocks last year.

“Out­stand­ing loans ended last year with 5.3 per cent growth and re­mained sup­port­ive of eco­nomic growth with am­ple liq­uid­ity,” said HLIB Re­search.

De­spite the neg­a­tive shocks, the bank­ing sec­tor “re­mained re­silient, with am­ple buf­fer to ab­sorb loss, chiefly ben­e­fit­ing from var­i­ous reg­u­la­tions on cap­i­tal man­age­ment”.

On fac­tors that pro­vided a strong lifeline to banks, HLIB Re­search said SME loans surged 9.2 per cent, re­sult­ing in busi­ness loans grow­ing by 4.8 per cent.

The gov­ern­ment’s sup­port for SME growth in the coun­try re­sulted in var­i­ous al­lo­ca­tions un­der the 2017 Bud­get for SME de­vel­op­ment amount­ing to RM930 mil­lion.

The firm noted that there was fur­ther mod­er­a­tion of house­hold debt growth last year to 5.4 per cent (2015: +7.3 per cent), and this re­sulted in house­hold debt level dip­ping to 88.4 per cent of GDP from 2015’s 89.1 per cent.

HLIB Re­search said the bulk of the debt was tied up in prop­er­ties and prin­ci­pal-guar­an­teed in­vest­ments, which con­trib­uted to wealth ac­cu­mu­la­tion.

Over­all, the re­search house takes a con­ser­va­tive stance on the bank­ing sec­tor with a “neu­tral” rat­ing.

How­ever, those within the sec­tor that re­ceived “buy” rec­om­men­da­tions are Malayan Bank­ing Bhd with a tar­get price of RM9.45, BIMB with a tar­get price of RM4.86 and Al­liance Fi­nan­cial Group with a tar­get price of RM4.20. Fran­cis Dass

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