Household loans growth higher in September

Maybank IB says it helped mitigate slowdown in non-household loans

PETALING JAYA: Maybank Investment Bank Research (Maybank IB) has maintained its industry loan growth forecast and has a “neutral” outlook on the banking sector.

According to the research firm, industry loan growth in September 2017 slowed to 5.2% from 5.8% in August 2017, owing to slower expansion in non-household loans.

However, household loans grew to 4.2% from 4.1%, helping to mitigate the slowdown in non-household loans to 2.4% from 2.8% in August.

“On a three-month moving average (3M MA) basis, loan applications rose 9.2% yearon-year (y-o-y) in September 2017 while loan approvals continued to expand at a double-digit pace of 11.1% y-o-y.

“Positively, while working capital loan applications contracted for the 16th consecutive month on a 3M MA basis, the pace of decline has been tapering off from as high as -23.4% y-o-y in June 2017 to just -3.7% y-o-y in September 2017.”

Total systems deposits growth slowed slightly to 4.5% y-o-y compared to 5% y-o-y in August. Current account, savings account continued to expand at a faster pace of 8.8%.

Business deposits expanded 11.3% y-o-y while consumer deposits slowed to 3.7% y-o-y from 4.2% y-o-y in August.

Absolute gross impaired loans (GIL) rose 6.5% y-o-y versus 6.4% y-o-y in August, but the overall GIL ratio was stable at 1.67%, as was the loan loss coverage at 81.2%, said Maybank IB.

Meanwhile, Kenanga Research noted that while the banking sector’s asset quality improved and was looking stable, loan growth is likely to be challenging for the fourth quarter of calendar year 2017.

“For the second quarter in a row, loan growth fell at 0.1% quarter-on-quarter (q-oq).

“Loan applications and approvals seemed to be on a downtrend with fourth-quarter growth likely challenging, as corporates looked to the debt market for financing,” said the research firm, which also has a neutral call on the sector.

On a positive note, Kenanga Research said that household loans are still resilient, looking likely to drive fourth-quarter demand, supported by the usual pick-up in growth at the end of the year by corporates.

With liquidity at comfortable levels, it said that net interest margin compression would be mild, underpinned by a cheaper cost of funds arising from lesser pressure on deposit rates and the upward trend in business deposits.