Banking sector on track to meet 5% loan growth

PETALING JAYA: The banking sector is on track to meet the projected 5% loan growth in 2018 on the back of a 5.5% gross domestic product (GDP) growth, said AmInvestment Bank.
“February 2018 saw household loan growth rising to 5.6% year-on-year versus 5.3% year-on-year in January 2018. The improvement was contributed by a stronger pace of loans for purchase of securities, personal loans and credit cards. Mortgage loan growth continued to be stable,” it said in its report today.
Non-household loan growth climbed to 3.1% year-on-year from 2.7% year-on-year in the preceding month. Growth in working capital loans was stable at 0.7% year-on-year while that for construction purposes surged to 7.9% year-on-year.
Year-to-date, industry loan growth was 4.5% annualised, boosted by improvements in both household and non-household loans growth.
The growth of industry loan applications declined to 5.8% year-on-year compared with 25.5% in January 2018. Growth in household and non-household loan applications were slower at 4.6% year-on-year and 7.2% year-on-year respectively.
“We believe that the decline was contributed by the shorter month in February which included a festive season. By sector, the decline in growth of loan approvals was mainly contributed by slower approvals of loans to the manufacturing, utilities, wholesale and retail trade, restaurants and hotels, finance, insurance and business activities as well as the household sectors,” said AmInvestment Bank.
The banking sector deposits’ growth slipped to 4.2% year-on-year, down from 4.4% year-on-year in January 2018. Growth in individual deposits gained traction to 3.2% year-on-year but was dampened by a slower growth in business enterprise deposits of 8.9% year-on-year. Loan-to-fund ratio and loan-to-fund and equity ratio remained stable at 83.5% and 72.9% respectively while industry CASA growth continued to slow down for the second consecutive month to 6.3% year-on-year compared with 8.5% in January 2018 and 9.4% in December 2017.
Following the Overnight Policy Rate (OPR) hike of 25bps in January 2018, the banking sector’s weighted average lending rate and base rate for commercial banks continued to rise to 5.41% and 3.89% respectively in February 2018.