Consumer loan to be main driver of banking loan growth this year

PETALING JAYA: Consumer loans are forcast to grow between 8% and 11% this year, albeit slightly slower than last year and it will be a key driver for overall loans growth in the banking system, said analysts and industry observers.

Many expect business loans growth this year to moderate partly due to slower corporate loans disbursements and the repayment of loans for mega projects like those under the Economic Transformation Programme (ETP) coupled with strong demand for hire purchase loans for cars and residential property.

Alliance Research banking analyst Cheah King Yoong said business loans hit a high with annualised growth rate of 15.9% in June 2012 before tapering off to 9.2% in December.

He added this led to overall annualised industry loan growth to hit a high of 12.7% in June before moderating to 10.4% in December last year while consumer loan growth for last year stood at 11.4%.

He expects household loans to be the key loan driver for this year in anticipation of the significant amount of ETP-related loans being disbursed this year which could be repaid next year and drag down the business loan growth momentum for the year.

“We expect consumer loan growth for this year to be between 8% and 10% driven by recovery in hire purchase loans and continued robustness in property loans,'' Cheah told StarBiz.

Malaysian Rating Corp Bhd (MARC) projects consumer loans growth to be within the range of 9% to 11% this year.

Its chief economist Nor Zahidi Alias feels consumer loans could outpace business loan growth this year as the household sector remained resilient and demand for loans was still strong.

Despite the measures by Bank Negara to reign in household debt like the loan to value of 70% for purchase of third properties and the prudent lending measures based on net income, loans to the household sector would likely grow at a more moderate pace this year compared with last year.

Notwithstanding this, Zahidi said the rating agency did not foresee it to decline drastically as banks were still competing for their share of consumer loans.

“The growth in loans for purchases of passenger cars and residential property are still resilient and they are likely to remain relatively strong this year.

“This is partly due to strong and stable residential prices. As such, banks tend to view the risk of loans provided for the purchase of residential homes as minimal.

“At the same time, decent economic growth of around 5.3% this year and the stable labour market with the unemployment rate below 3.5% will likely be the catalyst for the growth in loans for passenger cars,'' he noted.

MARC foresees loan growth to be in the range of between 8% and 10% this year from 10.4% last year.

The overall loan growth has softened since hitting the peak of 13% in July 2012, Zahidi said, adding that for this year the trend would not likely reverse with moderation likely to continue.

RAM Ratings co-head of financial institution ratings Wong Yin Ching said consumer loans were likely to continue growing at a healthy but at a slightly more moderate pace this year than last year.

On the other hand, the rating agency anticipated stronger financing demand from the corporate and commercial sectors, as the rollout of projects under the ETP and 10th Malaysia Plan gathered momentum, she added.

“Overall, we project that the total banking system's loan growth to taper slightly to the high single digits after clocking in 10.4% last year. This is supported by our expectations of a real gross domestic product growth of 5.3% this year and still-accommodative interest rates,” Wong said.

The Malaysian banking system's consumer/household loans have risen steadily over the last five years and currently constitute 55.6% of the system's total financing.

Stating his bullish views on overall lending, OCBC Bank (M) Bhd country chief risk officer Choo Yee Kwan said both consumer lending and corporate lending would see good opportunities for growth during this year.

For consumer loans, he said personal disposable incomes were stable and felt the country's direction of monetary policy would remain accommodative for economic growth.

On corporate lending, Choo said there would be opportunities in infrastructure-related project financing, underwriting/distribution of bonds, and corporate treasury business/trade financing and financing the small and medium-sized enterprises.

“For OCBC Bank, we look forward to another year of double-digit growth in the high teens,” he said.

“With our expanding network through our Islamic banking subsidiary, OCBC Al-Amin Bank Bhd, we are targeting good growth in our unsecured personal lending for the selected customer sub-segments, he added.

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