Malaysian banks to recover loan growth to 5% in 2018

This is on the back of a low base loan growth of 2.8% in 2017.

Malaysia banks will report a modest recovery in loan growth to 5% in 2018 after the low base in 2017, UOB Kay Hian reports. System loans grew 4.1% in 2017.

Here's more from UOB Kay Hian:

We note there was a m-o-m surge in working capital loan growth in Dec 17 (+1.1% m-o-m) that helped to close the gap between the lag in 11M17 loans growth and our full-year 2017 forecast. The weaker business loan growth of 2.8% in 2017 vs 2016’s +5.3% was the key drag to overall loan growth as consumer loan growth was relatively stable at 5.1% (2016: 5.2%). Lumpy business loan repayments and modest mid-single-digit business loan approvals led to the slower business loan growth.

Loan approval rose 15.4% in Dec 17 while loan application reversed to a contraction of 2.1% yoy (Nov 17: +15.8%). For 2017, loan approval recovered to grow 9.3% (2016: -11.8%), largely driven by the residential property segment which recorded a loan approval growth of 15.8% vs the sector’s loan approval growth of 9.3%. This compares against a 15.2% contraction in total residential property loans approved in 2016. Residential property approval rate by value improved marginally to 44% in Dec 17 (2017: 42.0%; low of 40.1%). Note that the improvement in sector loan approval growth was factored into our stronger 5.0% loan growth assumption for 2018.