Malaysian bank loan growth up 5.6% in 2018

Corporates and households drove yearly lending demand.

Malaysian bank loans grew at a quicker pace in 2018 at 5.6% from 4.1% in 2017, according to Moody's Investors Service. 

Corporates and household demand drove the yearly lending gains which received a boost from the removal of the goods and services tax (GST). Consumer loans account for more than half (57%) of the total loans in Malaysia's banking system. 

The strong performance of the household and auto loan segments are expected to more than offset muted construction growth following the cancellation or delay of high-profile infrastructure projects including the Kuala Lumpur-Singapore High Speed Rail (HSR) and the delay of the East Coast Rail Link, according to an earlier report from BMI Research, 

The positive lending momentum, however, is expected to taper off to around 4-5% in 2019 as slower economic growth and policy uncertainity about the election of the Pakatan Harapan (PH) government deal a blow to credit demand.

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“Post-GE14 macro policy uncertainty could have a slight dampening effect on the banking sector’s growth. As such, we believe the sector is unlikely to chart the same degree of outperformance prior to GE14,” UOB analyst Keith Wee Teck Keong said in June report. 

Asset risk will also rise as business conditions worsen for export-oriented sectors, a development that will reverse gains made in 2018 caused by slower formation of new impaired loans, loan repayments and write-offs, added Moody's.