KUCHING: A hike in business loans growth in October supported the recovery of overall loans growth between September to October, which stayed at nine per cent year on year (y-o-y).
In October, total loans outstanding grew at an unchanged pace of nine per cent y-o-y to RM1.309 trillion. Growth was led by the business segment at nine per cent y-o-y.
“This was supported by loans for working capital (which also grew nine per cent y-o-y) and the purchase of non-residential property (up by 15.2 per cent y-o-y).
“Not surprisingly, credit extended to consumers advanced at a stable pace of 9.1 per cent y-o-y. Activity was led by the purchase of residential property at 13.6 per cent y-o-y and consumer durables (increase by 222.8 per cent y-o-y),” said TA Securities Holdings Bhd (TA Research) in a note on the sector.
Looking at specific divisions, the team at Maybank Investment Bank Bhd (Maybank IB Research) outlined liquidity and asset quality as areas that it was watching closely.
“Deposits growth picked up marginally – 6.5 per cent y-o-y in October versus 5.9 per cent y-o-y in September – but current account and savings account growth slipped to 4.5 per cent, the slowest pace in over six years,” it observed.
“At 25.2 per cent of total deposits, this is the lowest since November 2012 and points to ongoing funding cost pressures.
“Non-residential property’s absolute non-performing loans have risen over five consecutive months and are up 22 per cent from a low in May 2014. Loans to this segment has been growing at a double-digit pace for several years now and account for 13 per cent of system loans.
“There are, as such, grounds to be wary of asset quality issues in this segment.” Affin Hwang Investment Bank Bhd (AffinHwang Capital) believes despite a moderating loan market, there are still certain outperformers who stand out.
“In our view, despite the slowing momentum in the credit market, outperformers (with above industry loan growth) such as Public Bank (group annualised loan growth at 10 per cent versus the industry at 8.2 per cent) stands out given its minimal exposure to corporate lending (at 10.9 [er cemt of portfolio) while simultaneously having a relatively established franchise in retail lending.
“Even Maybank’s Consumer Financial Services division continues to perform well – 9M14 loans grew at an annualised rate of 9.5 per cent and hence, cushioned the impact of the slowdown in the corporate segment.”