Analysts keep 2015 loan growth forecasts
> Increase slows to 9.7% in September as lending to household sector weakens
PETALING JAYA: Analysts are maintaining their projections on the loan growth for the banking sector amid loan growth slowing to 9.7% in September year-on-year (y-o-y) from 10.2% in August mainly attributed to the household segment whereby growth slowed to 8.1%.
MaybankIB Research said working capital loan demand continues to support the industry’s loan growth as household lending wanes.
Even though working capital loans continue to lead nonhousehold loan growth, the research house said it remains cautious amid slower economic growth.
Aggregate loan approval rates have fallen to a new low of 43% on a three-month moving average basis as the average mortgage loan approval rate declined to 48% while nonresidential property loan approvals remained low at 40%.
MaybankIB is maintaining the loan growth forecast of 7.8% for 2015.
The industry’s loan-to-deposit (LD) ratio was a stable 90.1%. Foreign currency deposit accounts continue to grow at a rapid pace (+37% yoy) but make up just about 7% of total deposits.
Absolute net performing loans (NPLs) rose 1.9% mom, led by an 8.3% mom increase in non-residential property NPLs and a 4% mom increase in working capital NPLs.
Hong Leong Investment Bank (HLIB) Research has maintained its view that the asset quality will continue to hold up well despite high household debt and concerns about asset quality amid a plunge in oil prices given that corporates are not highly geared and absence of widespread unemployment.
It is keeping loan growth projection at 8% for 2015 despite stronger year-to-date growth given the higher base, slower applications growth, near record low approval rate and higher LD ratio.
RHB Research said that stricter credit approval standards in recent months meant that a further slowdown in the growth of household loans is expected going forward.
“Consequently, banks are growing their business loans more aggressively. On balance, we project loan growth to slow down to 6.0-7.0% in 2016, from an estimate of around 8.5% in 2015, constrained by more stringent rules on lending to households and curbs on the property market,” it added.
HLIB Research said while liquidity is still ample to fund domestic economic growth, higher LD ratio could limit loans growth and pressure margin.
Meanwhile, it said a decline in average lending rate to only five basis points above an all-time low, intense competition for deposits and higher LD ratio will continue to exert pressure on the margin.
HLIB Research opined that solid asset quality and capital ratios are intact to support growth and capital management, especially with the dividend reinvestment plan.