KUALA LUMPUR: The responsible lending guidelines issued by Bank Negara for banks since the beginning of this year may have less of a downside impact on loans growth than initially thought, Hong Leong Research said.
Hong Leong Research's banking analyst Low Yee Huap said in a report that the impact of responsible lending has so far affected mainly the lower income group which consisted 12.7% of total loans.
This is also premised upon the latest banking statistics for March which showed that year-on-year (y-o-y) loans growth accelerated to 12.2% from a growth of 11.9% in February, after two consecutive months of slowdown due to seasonal and festivities factors.
In March, banking statistics showed a higher y-o-y loans growth to the business sector for the purposes of construction and working capital with a y-o-y growth of 19.2% and 10.4% compared with 16.2% and 10% respectively in February; while the household segment slowed to 11.9% from 12.1% in the previous month likely due to the responsible lending guidelines.
Low had maintained loans growth target of 9% in 2012 with an overweight call on the banking sector adding that a boost from the economic transformation programme (ETP) and would also positively impact consumer credit.
“The (banking) sector is the best proxy to the domestic economic growth and will enjoy significant multiplier effect from implementation of ETP projects.
“Continued consumption will indirectly boost demand for hire purchase, mortgage, personal loans and credit cards,” he said in the report.
The overweight call is also underscored by the banking system's health which is in a “better position” today but also highlighted that the stress point to the system's health would most likely be from the lower income group, while the middle to higher income group are financially sound.
“As for the lower income group, we laud Bank Negara's preemptive moves and the role played by Agensi Kaunseling dan Pengurusan Kredit in ensuring the system's health,” he said.
Meanwhile, CIMB Research analyst Winson Ng Gia Yann, who maintained a neutral stance on the banking sector , had a less sanguine view despite the higher y-o-y loans growth in March as compared with the previous month.
“We do not view this as a surprise because the improvement (in loans growth) was small, and loans approval, which is a leading indicator, increased by 17.6% y-o-y in February,” Ng said in his report.
“We still see downside risks for loan growth from March's level given the moderating trend for the leading loan indicators in March,” Ng added with an industry wide loans growth forecast of 9% to 10% for the entire 2012.
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