Sunday, November 28

Banking sector sees sluggish growth in loans

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DEMAND UNCERTAINTIES: According to OSK Research, the largest drag within the household loan approvals segment is the demand for purchase of passenger cars (down 23.5 per cent) as a result of the uncertainties created by the new HPA.

KUCHING: OSK Research Sdn Bhd’s (OSK Research) banking sector report released recently shows that loans growth in the country continues to moderate.

The report indicated that total loans growth toned down to 12.8 per cent from 13.8 per cent to 13.4 per cent year-on-year (y-o-y) due to weaker growth in the business loans segment which was up 14.3 per cent.

Business loans growth was lower due to weaker purchases of non-residential property (up 20.2 per cent), construction (up 18 per cent) and working capital (up 10 per cent).

On the other hand, weak loans growth in purchase of passenger cars (up 5.8 per cent) and residential property (up 12.8 per cent) contributed to slowing household loans growth.

Loan applications growth trended lower to 8.5 per cent from 29.9 per cent y-o-y on muted growth in both the business (9.3 per cent for July and 38.5 per cent for June) and household segments (7.6 per cent for July and 21.7 per cent for June).

Business loan applications declined on slower demand in loans for the purchase of non-residential property (up 25.6 per cent), construction (down 18.7 per cent) and working capital (down 16.6 per cent).

Weakened demand in the purchase of passenger cars (down 7.4 per cent), residential property (up 9.8 per cent), personal use (up 5.5 per cent) and credit card (down 3.2 per cent) weighed on loan applications in the household sector.

Loan approvals were on a downward trend with impact of new Hire Purchase Act (HPA) filtering through. Loan approvals growth continued to contract, no thanks to lower household (up 8.5 per cent) and business loan (up 1.2 per cent) approvals.

The largest drag within the household loan approvals segment was the demand for purchase of passenger cars (down 23.5 per cent) as a result of the uncertainties created by the new HPA. Residential properties (up 14.7 per cent) remained relatively resilient.

The contraction in approvals for business loans were more broad based.  Weaker purchases of fixed assets other than land and building (down 4.4 per cent), construction (down 26.5 per cent) and working capital (down 1.7 per cent) led to a drop in the number of approvals for business loans.

Overall loan disbursements were also feeble with July showing 7.6 per cent and June with 14.5 per cent, due to weaker disbursement in the business segment (up six  per cent).

Total deposits growth moderated marginally to 11.3 per cent from 11.5 per cent y-o-y due to fewer deposit placements from the statutory authorities (five per cent for July and  seven per cent for June) and business enterprises (10.7 per cent for July and 11.6 per cent for June).

Net impaired loans were unchanged at two per cent, further supporting OSK Research’s view that asset quality was largely intact. Loan loss coverage rose to 97 per cent compared with 94.8 per cent last month.

In view of the more stringent and conservative FRS139 provisioning coupled with the system’s relatively high impaired coverage ratio, the research house believed that asset quality in the banking system remained largely intact.

The base lending rate (BLR) remained unchanged at 6.54 per cent while the average lending rate (ALR) trended lower to 5.04 per cent with June’s figure being 5.07 per cent. The average quoted fixed deposit rates for tenures of between one and 12 months stood at 2.95 per cent to 3.23 per cent respectively.