M’sia’s banking sector sees improvements in loan applications

KUCHING: Malaysia’s banking sector saw an improvement in its loans applications as the banking industry’s total loan applications grew to 0.02 per cent year-over-year (y-o-y) in March.

While this is a vast improvement from the 5.8 per cent y-o-y decline seen in February, AmInvestment Bank Bhd (AmInvestment Bank) guided that the current pace of loan applications is still slow.

Nevertheless, it pointed out that the slight boost in loan applications were caused by a surge in industrial loan applications of 11.4 per cent y-o-y in March, as compared with a decline of 7.2 per cent y-o-y in February.

Aside from that, it noted that household loan applications slipped further to 8.1 per cent y-o-y. “By loan purpose, growth in loan applications for personal loans and working capital rose compared to the previous month.

“The pickup was seen from the higher growth in loans applications from the manufacturing and the finance, insurance and business sectors,” said AmInvestment.

The increases in industry loan applications caused the growth of industry loan approvals to see a further deceleration to 7.6 per cent y-o-y from the 4.5 per cent y-o-y seen in February, it added.

“By sector, the decline in the growth of loan approvals was mainly contributed by slower approvals of loans to the real estate, transport, storage and communication, household, agriculture coupled with the mining and quarrying sectors,” it guided, adding that working capital loans shrank to 0.3 per cent y-o-y.

It further noted that the decline of industry loan approvals negated the effects of increased industry loan applications and caused industry loans growth to slip to 4.4 per cent y-o-y in March from 4.5 per cent y-o-y in February.

On the other hand, it said, impaired loans saw an increase for the third consecutive month as it increased by 1.8 per cent month- over-month to RM441 million in March due to increase impairments in property, construction and working capital loans.

Aside from that, it noted that the average lending rates also saw an increase of two basis points to 5.43 per cent while base lending rate remained at 6.9 per cent.

“This was due to the refining of bank’s methodologies for the implementation of MFRS 9 which resulted in an increase in provisions.

“Notwithstanding that, the industry’s total GIL remained steady at 1.6 per cent while the NIL ratio continued to inched up to 0.99 from 0.94 and 0.91 per cent in Feb and Jan 2018 respectively,” it explained.

Despite the lacklustre performance in loans, deposits and current accounts and saving accounts ( CASA) growth continued to be robust with deposits growing at a faster pace of 5.2 per cent y- o-y and CASA expanding to 6.3 per cent y- o-y.

Overall, AmInvestment Bank is maintaining their ‘overweight’ stance on the sector with ‘ buy’ calls on several banks, namely: RHB Bank, Public Bank, Alliance Bank, and BIMB Holdings at a FV of RM4.80.