KUCHING: The banking sector’s lending showed an uptick in June, growing 9.1 per cent year-on-year (y-o-y) to RM1,387.7 billion.
On a month-on-month (m-o-m) basis, loan growth increased by one per cent driven by higher business loan disbursement.
Analysts observed that loans to businesses expanded by 9.5 per cent y-o-y and 1.5 per cent m-o-m supported by lending to the real estate, finance, insurance and business activities, construction as well as transport, storage and communication sectors.
They also observed lending to household moderated to 8.7 per cent y-o-y in June but inched up 0.6 per cent m-o-m to RM791.2 billion.
RHB Research Institute Sdn Bhd (RHB Research) in a report yesterday said the lower loan growth to the household segment y-o-y was attributed to softer lending for the purchase of securities compared to June 2014’s household loan growth of 11.5 per cent.
Meanwhile, Affin Hwang Investment Bank Bhd (Affin Hwang) in a separate report said as at June 2015, loan growth indicators were mostly positive against May 2015 as loan approvals were up 23 per cent m-o-m and loan applications gained 9.2 per cent m-o-m.
RHB Research noted business loan applications rose four per cent y-o-y in June 2015 and five per cent m-o-m while business loan approvals surged by 51 per cent y-o-y and 34 per cent m-o-m as loan approvals for agriculture and education, health and other sectors were particularly strong in June.
The research firm believed that the higher loan approvals in June could signalled that business lending activities ahead would be well-supported.
Nonetheless, RHB Research noted household loan applications were flat y-o-y but increased 14 per cent m-o-m. The research arm of TA Securities Holdings Bhd (TA Research) in a report said early indicators showed poor applications for residential property and financing for passengers cars.
Additionally, RHB Research said household loan approvals in June were down seven per cent y-o-y attributed to the decline in approvals caused by a 58 per cent y-o-y drop in loan approvals for the purchase of securities.
Given the lacklustre capital market activities and concern over asset quality of banks as well as slower financing growth and muted earnings outlook for banks with headwinds in terms of net interest margin pressure, analysts remain neutral on the outlook of the banking sector.
For exposure to the banking sector, Affin Hwang favoured Public Bank Bhd and Hong Leong Bank Bhd given their stringent credit underwriting standards and established franchises in the domestic retail financing markets.