Malaysian banks hit by lower loan demand

New loan applications shrunk 6% in March.

Malaysian banks are struggling with less loan applications in the past few months and earnings momentum has stalled under increasing pressure, according to analysts cited by The Star. 

Also read: Looming loan slowdown threatens Malaysian banks' 2019 earnings

New loan applications shrunk 6% in March even as banks finally cleared their backlog with loan approvals up  6.3% in the same month, UOB Kay Hian was quoted in the report.

Business loan applications fell 8.5% in March to extend a decline of 7.9% and 20.5% in January and February, respectively.

Loan applications from Malaysian households also dropped by 3.9% YoY in March amidst subdued consumer and SME sentiment. The downward trend is set to persist with household loan growth tipped to fall to 5.1% by end-2019 from 5.6% in the previous year, according to projections from Maybank.

However, things are looking for banks in Malaysia as a revival in big-ticket infrastructure projects is expected to spur corporate borrowing and benefit banks with significant corporate exposure like CIMB, Maybank and RHB Bank, according to UOBKH.

“We stick to our projected loan growth of circa 5% for 2019. We continue to rate Malaysian banks as “neutral” given the concerns over margin erosion and an expected uptick in credit costs,” CIMB Research said in a separate note.