KUCHING: A softer momentum in household loans are expected in the near term,with loan growth momentum staying broadly stable in August based on Bank Negara Malaysia’s (BNM) statistics.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), loan for the sector in August 2013 grew 9.3 per cent year on year (y-o-y). Compared to the system’s loan outstanding as at end December 2012, loan growth for the sector grew 6.5 per cent for the first eight months of 2013.
This translated to an annualised growth rate of 9.8 per cent which was slightly lower than the annualized growth rate for first seven months of 2013 of 9.9 per cent.
The research house also noted that business loan growth moderated to 7.7 per cent y-o-y, down 40 basis points (bp) from July 2013.
“In terms of sectors, loan growth for construction, real estate, manufacturing, wholesale, retail, restaurants and hotels, primary agriculture and transport, storage and communication sectors grew at slower momentum in August 2013 compared to the previous month,” it highlighted.
Household loan growth was stable with loans growing 11.9 per cent y-o-y in August 2013 versus 12 per cent y-o-y in July 2013.
“Growth of loans for residential property grew 12.9 per cent y-o-y in August 2013 compared to 12.7 per cent y-o-y in July 2013 while growth of loans for purchase of non residential property grew 17.2 per cent y-o-y in August 2013 vs. 17.3 per cent y-o-y in the previous month.
“Elsewhere, growth of loans for purchase of securities, personal loans and loans for purchase of passenger cars moderated compared to the previous month.
“Industry loan application growth rose to 22 per cent y-o-y. The improved growth rate in loan applications was mainly due to higher growth in applications for working capital loans, loans for purchase of securities and loans for other purpose,” MIDF Research stated.
Loan applications for household sector grew at slower pace of 15.1 per cent y-o-y in August 2013 vs. 27.1 per cent y-o-y in July.
With exception of application of loans for purchase of securities, all other types of applications for household loans (including mortgage loans) moderated in August 2013 compared to the previous month.
“Growth of loan approvals in August 2013 declined to 9.2 per cent y-o-y. Contributing to the slower pace was mainly the slower growth of approvals for mortgage loans and working capital loans.
“Momentum of loan approvals for household loan softened in August 2013. Growth rate of household loan approvals declined to 14.4 per cent y-o-y in August 2013 compared to 27 per cent y-o-y in July 2013,” it added.
The industry’s average lending rates (ALR) improved to 4.54 per cent in August 2013 while the average sector’s BLR remained at 6.53 per cent.Interest spread improved eight bp mom to 1.57 per cent underpinned by the rise in ALR. Average Fixed Deposit (FD) rate (for tenures of up to 12 months) remain unchanged.
MIDF Research also added that gross impaired loan (GIL) ratio for the sector was unchanged at two per cent while net impaired loan (NIL) ratio remained at 1.4 per cent. Industry loan loss coverage (LLC) inched higher to 98.2 per cent.
With the volatile market likely to cause challenges in sustaining the growth of investment and trading income as well as foreign exchange profits achieved earlier, MIDF Research anticipated the sector’s credit cost for CY13 to be close to 30bps.
“For capital market activities, due to the volatile equity markets, deferments in IPO listings are expected at least to the 1QCY14. Nonetheless, we expect bond raisings to be still active with corporate still raising capital through the debt market.”