, Malaysia

Home loans buoy Malaysian banks' growth prospects

It’s the only bright spot amidst the rest of the underperforming pack.

Residential property loans continue to be key growth driver of Malaysian banks for the year ahead after expanding 8.9% YoY in December 2017, according to UOB Kay Hian.

This comes as Jan 18 sector loans growth remained weak at 4.2% with home loans remaining the bright spot as non-residential and corporate loans registered dismal performances.

Auto loans also contracted 1.8% YoY, whilst working capital loan growth flattened at 0.8% YoY.

Larger banks like RHB, HLBank and CIMB are targeting modest 5% loan growth for 2018, whilst smaller banks are poising for a slightly wider loan target between 5-7% given lower bases and stronger niche focus. UOB Kay Hian expects overall sector loans growth for 2018 to fall between 5-5%.

A separate report noted that loan growth will rebound in 2018 amidst stable consumer lending and net interest margins. Banks with higher exposure to the oil and gas sector will also witness improved asset quality on the back of stronger oil prices. 

Here’s more from UOB Kay Hian:

Overall sector aggregate impaired loans balance declined 3.1% qoq in 4Q17 but increased 4.5% yoy. Gross impaired loans ratio declined 9bp qoq to 2.02%. This, coupled with lumpy recoveries led a 22% decline in provisions with net credit declining to 25bp in 4Q17 vs 32bp in 3Q17. Apart from AMMB which was impacted by lumpy corporate loan provisions, the rest of the banks experienced qoq declines in provisions largely driven by recoveries and write-backs. The lumpy recoveries also led to a sharp 39% yoy decline in provisions in 4Q17 despite a mild 4.5% yoy uptick in absolute gross impaired loans balance.

Aggregate loans loss coverage (LLC) ratios declined from 76% in 4Q16 to 69% in 4Q17. LLC was lower across most banks except for Maybank. That said, most banks topped up their coverage ratios via regulatory reserves, and as such, LLC ratios inclusive of regulatory reserves were at a relatively comfortable 102% on average across most banks except for Maybank (95%) and CIMB (84%). The top up via regulatory reserves has allowed banks to maintain a relatively low level of credit cost in 2017 which is likely to normalise upwards in 2018 with the adoption of MFRS9. We have pencilled in an upward normalisation in net credit cost from 32bp in 2017 to 36bp in 2018. 

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Exclusives

ZA Bank’s Devon Sin on why Web3 is key to HK’s growth
The bank has expanded services to cater to stablecoin issuers and Web3 companies. 
Retail Banking
CIMB Niaga leads the way in captivating Indonesia’s youth
The bank’s digital solutions are winning over younger generations with 3.2M mobile users and 96% digital transaction rate in 2023.
BCA sets benchmark in Indonesia’s microfinance sector
Innovative approaches reflect the bank’s commitment to pushing financial inclusion and fostering economic growth.