Malaysian banks hit by tepid loan growth

Loans grew by just 3.9% in August and loan applications shrunk 3.7%.

Banks in Malaysia should brace for a slowdown as a subdued loan outlook continues to weigh in on the sector's growth trajectory, according to Maybank Kim Eng. 

Loan growth remained unchanged at 3.9% in August with household loans growing by 4.6% and non-HH loans increasing by 2.9%.

In an earlier report, Maybank Kim Eng forecasted household and non-household loans to drop to 5.1% in 2019 from 5.6% in 2018. 

Also read: Will the HSR cancellation dampen Malaysian banks' loan growth?

On an annualised basis, loan growth hit 2.9% in August from 2.3% in July, with a pick-up in HH loan growth to an annualised rate of 4.3% from 4.1% in Jul 2019 whilst non-HH loan growth was a faster 1.1% annualised versus a contraction of -0.1% in July. 

Loan applications shrank 3.7% in August from 0.8% in July on a three-month moving average basis. Loan applications contracted across all major consumer segments and mortgage applications saw growth drop to 2.7% in August after having expanded at a rapid double-digit pace over the past three months.

A separate report from Bloomberg notes that the crowdfunding model is rapidly gaining traction as a way for consumers to finance property purchases as reluctant banks continue to hold back funding for loans. 

The only bright spot to tepid loan applications was working capital loans, which jumped 12.5% YoY on a 3M MA basis in Aug 2019 from 1.6% in July, having contracted in the past 11 consecutive months prior to July.

The average loan approval rate on a 3M MA basis also dropped to 48% end-Aug 2019 from 50% end-Jul 2019.