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Wednesday, 3 May 2017

(The Star) Loan growth up at faster pace

PETALING JAYA: Loan growth expanded at a faster pace in March and analysts are expecting a recovery this year.

According to latest official banking statistics, loan growth for the banking system picked up and grew at 6% year-on-year (y-o-y) in March to RM1.54bil from 5.3% y-o-y at the end of February.

The recovery was supported by the business loans segment, which grew by 7.2% y-o-y in March, up from 5.4% y-o-y in February.

Working capital loans’ upward trajectory also returned, with a 6.8% y-o-y growth in March versus a 6.1% y-o-y growth in February.

“We believe working capital loans are a good proxy for overall business borrowing.

“This suggests that either business conditions or business confidence continues to improve, and we believe that this will have a positive impact on the overall loan growth in the coming months,” MIDF Research said in its report.

Household loan momentum also inched up from 5.1% y-o-y in February to 5.2% y-o-y in March.

However, the pace of residential mortgages continued to slide, as expected, from 9% y-o-y in February 2017 to 8.8% y-o-y in March 2017, due to a continued downturn in the property market which started in early 2015.

CIMB Research noted that banks registered a cumulative loan growth of 1% in the first quarter of 2017, which translated to an annualised rate of 4% y-o-y.

“Although this may appear to be lower than our projected loan growth of 5%-6% for 2017, we regard the first-quarter growth as in line, as we expect a recovery in loan momentum in the coming months, on the back of improvements in business sentiment and robust loan approvals from February to March,” CIMB Research said.

MIDF Research said it is not making any changes to its expectations of loan growth in 2017, and it would rebound this year.

“This is especially so as our in-house team is expecting Malaysia’s gross domestic product to pick up higher than previously estimated. We note that the recent upturn in loan demand and approval continued in March,” MIDF Research said.

It also noted that loan demand and approval in the first quarter of this year were higher than those in the same quarter of the previous year.

Meanwhile, Hong Leong Investment Bank (HLIB) Research pointed out in its report that it has maintained its 2017 loan growth forecast at 6% y-o-y, supported mainly by the business segment that would capitalise on development spending, as well as a recovery in the small and medium enterprise segment.

“We expect banks to post an earnings recovery in 2017, on the back of higher loan growth expectations; continued discipline in expenses and the ending of impairment programmes.

“We expect banks’ loan loss coverage to improve in 2017, given the slower trend of large provisions,” it said.