Banking loans grew by 5.8 per cent y-o-y in February

KUCHING: Malaysian loans in February grew by 5.8 per cent year over year (y-o-y), meeting the expectations of industry analysts.

In a sector update, the research arm of Kenanga Investment Bank Bhd (Kenanga research) said that the registered loans growth in February was within their project 5.5 to 6.0 per cent target for 2024.

During the month, household loans grew by 6.2 per cent due to robust demand for residential properties and hire purchases while business loans grew at a slower pace of 5.3 per cent with retail and financial services leading in terms of segmental performances.

On a month on month (m-om) basis however, the research arm noted that business loans grew by 0.7 per cent and had overtaken household loans 0.3 per cent growth as they had expected a faster pacing to meet upcoming Raya festivities.

Meanwhile, business loans grew by 5.3 per cent as retail and financial services led in terms of segmental performances.

“Following January 2024 lumpy applications, we saw a meaningful easing in both household loans by 15 per cent and business loans by six per cent on a y-o-y basis.

“The difference was starker on m-o-m basis -18 per cent per cent but also stood at the lowest levels of under RM100 million since January 23 but this is reflective of the earlier months being seasonally softest,” said the research arm.

On a more positive note, industry gross impaired loans (GIL) during the main was maintained at 1.64 per cent with industry loan loss coverage setting in at 92.4 per cent, slightly lower than January’s 93 per cent.

“We opine that past pandemic concerns are not likely to remain in the market as we look towards a return to sustainable business environments.

“Previously troubled sectors such as construction and hospitality are expected to be rejuvenated with stronger infrastructure project flows as well as higher tourist arrivals,” Kenanga Researched shared.

That being said, the research arm still expects a final leg of impairments to materialise from retail accounts which clinched on much extended assistance programs following pending expiration.

Cash balances in the banking sector were also observed to be healthy as Kenanga Research highlighted that system deposits were growing at 4.0 per cent y-o-y and 0.53 per cent m-o-m.

While this was slightly below their own 5.5 and 6.0 per cent growth expectations, the research arm believes that the figures could have been impacted by higher spending during the festive period and are expecting deposit growth to pick up in the later part of the year.

Current account and savings account levels also remained stable at 28.7 per cent during the month and are expected to rise in the coming months as banks seek to readjusted termed deposit rates to less generous levels.