Malaysian banks to see 6%-7% loan growth this year - Moody’s

Banking sector (combo photo).

KUALA LUMPUR: Moody’s Investors Service expects Malaysian banks to record loan growth of between 6% and 7% this year compared to 5.3% in 2016.

Vice president-senior analyst (financial institutions group) Simon Chen, said the improvement could be largely driven by stable operating conditions in the country on the back of robust domestic economic activities.

“We are thinking of the possibility that businesses will have better clarity, with operating conditions stabilising and business sentiment might improve towards the second half of 2017.

“Improved sentiment in business sectors will also trickle down to stable consumer spending. That would perhaps provide an uplift to a better loan growth in the second half compared to the first,” he added.

He said this at a media roundtable briefing on Gulf Cooperation Council (GCC) and Malaysian Islamic banks: Navigating Through Headwinds Amid an Evolving Regulatory Landscape in Kuala Lumpur on Wednesday.

Chen also said a continued slowing of household loan growth is positive amid a mild deterioration in bank asset quality.

However, he was cautious that household debt servicing issues, could accelerate from either loss of employment or a higher cost of living.

Chen also shared an observation on an emerging trend among Malaysian banks on the strong growth of syariah-compliant investment accounts.

“We expect growth in investment accounts in Malaysia to remain strong over the next three to five years,” he said.

Malaysian banks have strong incentives to promote investment account growth as it provides capital benefits and an additional source of funding to grow their assets.

Meanwhile, Moody’s vice president and senior analyst, financial institutions group, Nitish Bhojnagarwala said the rating of two-thirds of GCC banks, had a stable outlook with stabilising oil prices, while international debt issuance would ease funding pressures. - Bernama