STANDARD Chartered's Malaysian unit expects a 10% to 12% rise in consumer lending next year, although competition will continue to erode housing loan margins.
The bank would grow its credit card business and lending to small- and mid-sized firms to offset lower returns from housing mortgages, chief executive Shayne Nelson said on Thursday.
Foreign lenders in Malaysia including HSBC, Citigroup and OCBC Bank, are competing with 10 domestic lenders to capitalise on growing private consumption.
Banks gave out RM115.9bil of loans in the third quarter, 11% more than in the April-June period, official data showed.
During the third quarter, lending to households grew 12% while loans to businesses rose 11%.
Private consumption is being primed to lead Malaysia's growth as the government cuts spending to trim the fiscal deficit to below 4% of gross domestic product next year and to balance its books by 2006.
Private consumption grew 5.4% in the three months to September.
Nelson declined to state the bank's margins.
But analysts estimated that margins on new housing loans industry-wide fell 0.6% to 0.7% a year over the past three years while old loan margins were down 0.3% to 0.4% a year.
Consumer banking, which contributes two-thirds to StanChart Malaysia's profits, will continue to underpin growth amid an expected upturn in the domestic economy.
“We are bullish on the Malaysian economy,” Nelson said in an interview.
Official projections put Malaysia's 2004 economic growth at between 5.5% and 6% while expansion this year is expected to top 4.5%.
StanChart, the country's oldest bank, which opened in 1875, has about a tenth of the Malaysian credit card and mortgage market.
Foreign banks account for a third of Malaysia's banking assets but face restrictions such as adding branches.
These limits, aimed at protecting local lenders, will be removed in 2007 under World Trade Organisation commitments.
Nelson, who assumed office in September, said the key lending intervention rate was expected to remain at the current level through 2004.
Malaysia last adjusted interest rates in May when it trimmed the intervention rate by 50 basis points to 4.5%. – Reuters
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