Wednesday, October 20

Banks likely to see pick up in loan growth towards the end of 2017

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KUCHING: The banking sector is likely to see a pickup in loan growth in the remaining months of 2017, analysts project.

According to AmInvestment Bank Bhd (AmInvestment Bank), industry loan growth further moderated to 4.6 per cent year on year (y-o-y) in October 2017 from 5.2 per cent y-o-y in September 2017, contributed by a slowdown in non-household loans while growth in household loans continued to be stable.

On a year to date (YTD) basis up until October 2017, industry loans growth continued to be slow at 3.52 per cent annualised against the research firm’s expectation of a five to six per cent growth for 2017.

“With an improvement in loan demand, we expect a pickup in loan growth in the remaining months of 2017,” AmInvestment Bank projected.

As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it had expected a loans growth of six per cent for the banking sector.

However, judging from the current trend the research arm now expected the figure to be around the 5.2 to 5.6 per cent region.

“While October’s loans growth was below five per cent, based on the loans demand, we anticipate that loans growth will accelerate slightly in November and December,” MIDF Research said.

In addition, it noted that a few banks are expecting loans to accelerate in the fourth quarter of current year 2017 (4QCY17).

MIDF Research believed that with the continued improved economic conditions in CY18 and, higher demand and approval for loans, the banking sector will be able to maintain its earnings potential.

“In addition, it is expected that there will be an overnight policy rate (OPR) hike next year which should give a short term boost to banking income,” the research added.

Meanwhile, AmInvestment Bank pointed out that post-third quarter of 2017 (3Q17) results, the larger banks like Malayan Banking Bhd (Maybank) has lowered its loan growth guidance to three per cent while CIMB Group Holdings Bhd (CIMB) hinted of that its loan growth target of seven per cent, which would be a tall order for 2017.

The research firm expected the industry in 2017 to end at the lower end of its five to six per cent projected growth.