RETAIL SEGMENT TO FUEL LOAN GROWTH THIS YEAR

MIDF Research maintains positive view on banking sector’s performance this year

THE retail segment is expected to be the main driver for the banking sector’s loan growth this year, moderated by “cautiousness” to 5.5 per cent yearon-year from six per cent previously.

MIDF Research said the revision was due to the impact of the 14th General Election (GE14) result, citing that businesses adopted a “wait-and-see” approach to the government’s economic policy direction.

It expects delay in loans demand and disbursement from corporate and small and medium enterprise segment.

However, MIDF Research said loan growth would be better this year compared with last year based on the current trend of loans applied and approval rate, which would provide a steady loan pipeline.

“We maintain our positive view of the banking sector’s performance this year as the stable employment environment would drive loan growth.

“With higher demand and approvals for loans, we believe the sector would be able to maintain its earnings potential.”

It said total loans grew at a faster 4.8 per cent pace, totalling RM1.61 trillion, in April.

It expanded 4.4 per cent to RM1.60 trillion as at March and this could be due to a rebound in demand from a weak February.

“We expect loan growth to pick up pace in the coming months due to the healthy loan pipeline.”

Mortgage loans for the purchase of residential property continued to be robust at 8.9 per cent year-on-year to RM533.5 billion.

“It is the largest segment in the system at 33.1 per cent. Mortgages seemed to settle around this level since December 2016.”

The next highest is working capital loans at 23.2 per cent.

While loan approval rate grew faster than loans applied, approval rate still came in lower.

“The loan approval rate in the first four months was maintained at the 43 per cent, which we believe is still healthy,” it said.

Meanwhile, deposits grew at a faster pace for the second month running, coming in at 5.4 per cent year-on-year. Current account/saving account deposits also slowed slightly at six per cent year-on-year.

This could be due to depositors switching to fixed deposits, it said.