Banking system to continue supporting market activities
Posted on August 4, 2012, Saturday
KUCHING: The banking industry is set to outperform as Bank Negara Malaysia’s (BNM) June 2012 monthly statistics report showed strong indications that the system will be able to support the lending and capital market activities with local funding.
“Growth in household loans and business loans were the strongest contributors to the overall growth. Total loans expanded 12.6 per cent year-on-year (y-o-y) to RM1,067 billion and 4.3 per cent quarter-on-quarter (q-o-q) in June,” according to the research arm of Kenanga Investment Bank Bhd (Kenanga Research) in its research report.
On an annualised basis, the total loans grew 12.7 per cent, in line with the research firm’s 11 to 13 per cent growth forecast for 2012.
Kenanga Research noted that loans to households grew at a steady rate of 11.9 y-o-y, parallel to the stabilising mortgage loan growth at 18.1 per cent y-o-y and improving hire purchase loans growth of 6.9 per cent y-o-y.
It also pointed out that business loans growth continued its momentum by achieving an increase of 13.6 per cent y-o-y from 13.6 per cent in May which was attributed to the recent increase of Economic Transformation Programme (ETP) -related project deals being awarded.
“Despite a strong comeback in May 2012, lending indicators normalised in June on a y-o-y basis. June loan applications normalised to 10.5 per cent from May’s 13.6 per cent,” added the report which noted further that this fall was due to the decrease in loan demand from the household sector and financial intermediation, partially due to the effect from the introduction of the responsible lending guidelines by BNM earlier.
With most banks already configuring themselves to comply with the rules, Kenanga Research expected the growth in household loans to continue to normalise in the near future.
The 12.6 per cent y-o-y growth in total deposite was due to the 10.1 per cent increase in fixed deposits and 11.2 per cent increase in demand deposits. With the total deposits hovering around the 12 to 14 per cent level, the loans-deposits ratio remained stable at 78.5 per cent.
According the the research firm, gross impaired loans ratio took a small drop to 2.2 per cent as compared with May’s 2.3 per cent. This was a decrease of RM1.82 billion from the previous month.
“We see this as a positive trend as it showed that the banking system is able to finance all the loans and projects, especially with the current ETP projects rollouts,” said Kenanga Research.
Kenanga Research thus observed strong indications that the banking system would be able to support the lending and capital market activities with local funding.
The loan-to-deposit ratio had been climbing since November 2011 to 78.5 per cent with the unutilised deposits at RM292.8 billion. The research firm believed that the excess liquidity would be able to support ETP-related infrastructure projects like the My Rapid Transit (MRT) project.
“With the first phase of the MRT project moving into active phase as well as other new ETP deals being awarded, we are very optimistic that the banking system will be able to fully finance the overall ETP projects without putting any stress on the local banking system liquidity,” it added further.
Having already achieved a 12.6 per cent loan growth this month, Kenanga Research believed that the banking industry would be able to outperform its industry loan growth forecast of 11 to 13 per cent despite a slightly weaker set of lending indicators.