Malaysian banks troubled by weak loan growth in 2023

Loan applications contracted 16.1%, according to UOB Kay Hian. 

Malaysia’s banks will continue to face weak loan growth in 2023, squeezing its net interest margin (NIM) and contributing to an “unexciting” 4% overall earnings growth for the whole year, reports UOB Kay Hian.

Loan growth is expected to moderate to 4.5% to 5% in 2023 after rallying 5.7% in 2022, according to UOB Kay Hian analyst Keith Wee Teck Kong. Higher interest rates and end of the SST exemption for auto loans will slow lending demand, he said.

Loan growth indicators have also weakened in end-2022. Loan applications contracted 16.1% in 2022. Applications for household and business loans both fell by 19.1% and 11%, respectively. 

Loans approval was also weak, contracting 16.1% due to reversal in business loans approval trend, Kong said.