PETALING JAYA: Banks are not restricting lending activities amid concerns that lenders have been reluctant or stringent in their financing.
While emphasising on the importance of financing to different customer groups, commercial banks said the disbursement of loans were in line with responsible lending guidelines and balanced against their risk metrics.
House buyers, according to the banks, are not “victimised” in view of the increase in home financing.
According to CIMB Group Holdings Bhd group CEO Tengku Datuk Seri Zafrul Aziz, banks are doing as much as they can to balance lending to customers with responsible financing in mind.
He said commercial banks would want to grow their loans to maximise returns, but that must always be balanced against the banks’ risk metrics, which in turn are developed based on guidelines issued by the regulators.
“The bank’s risk appetite is set in a way to commensurate returns for shareholders, without taking excessive risks while safeguarding the interest of the depositors and borrowers.
“Banks have policies and controls to ensure that risks taken to grow the business are contained. CIMB also adheres to Bank Negara’s responsible lending guidelines where financing is granted subject to the borrower meeting a certain debt burden threshold,” Zafrul pointed out.
He said the industry should educate borrowers on ways to improve their credit scoring to enhance the approval of their financing applications.
To promote financial inclusivity, CIMB Bank Bhd and CIMB Islamic Bank Bhd have set aside at least RM12bil for the B40 group to access to facilities such as home, automotive, Amanah Saham Bumiputra and personal financing from 2019 to 2020.
“In fact, the B40 segment has made up a significant percentage of CIMB Bank and CIMB Islamic’s retail customers since 2016,” he said.
A prime example of CIMB Bank and CIMB Islamic’s commitment to assist the B40 segment is via its lowest-in-market financing rate of 2.9% per annum, under Bank Negara’s RM1bil Fund for Affordable Homes, to help those in the B40 group buy their first residential property.
Zafrul said the customers’ ability to own a home is also a function of the residential property prices, supply of affordable homes, and wage growth.
Based on data from Bank Negara, the industry’s loan growth rebounded slightly to 4.6% year-on-year (y-o-y) in May from 4.5% y-o-y in April, ending a five-month downtrend.
This was underpinned by household loan growth, while business loans remained soft.
Household loan growth was up 5.3% y-o-y in May (April: 5.2% y-o-y) driven by residential mortgages and personal financing.
New loan applications and approvals continued to grow on a month-on-month basis, in particular for residential mortgages, autos and personal financing.
Despite complaints that banks were reluctant to provide financing to home buyers, statistics showed that banks were continuing to lend.
The industry’s home financing increased 7.6% as of end-2018 to RM559bil in terms of outstanding loans.Financing remained available for eligible borrowers, with 70% of housing loan borrowers being first-time owners of properties priced below RM500,000.
The overall industry housing loan approval rate remained above 70% as of the fourth quarter of 2018 (average 2013 to 2017 was 75.7%).
For the fourth quarter of last year, Malayan Banking Bhd’s (Maybank) approval rate was higher than 80%.
Maybank community financial services group CEO Datuk John Chong said the bank is supportive to providing financing for businesses to grow as well as help consumers in purchasing houses.
“We were the top residential housing financing provider last year where we achieved 10% in total net loan growth which translates to more than 13.50% market share, while our total approvals for residential housing financing grew 11.5% y-o-y.
In the first six months of 2019, Maybank’s residential housing financing disbursement grew by 21% (from RM 6.2bil to RM7.5bil) and it planned to disburse over RM50bil in housing financing over the next three years.
Chong said Maybank has supported and participated in the development of various government-initiated affordable housing schemes such as PR1MA, Skim Rumah Pertamaku, Skim Jaminan Kredit Perumahan and the recently launched BNM Funded Affordable Housing Loan Scheme.
In this aspect, he said Maybank would focus on providing financing to the B40 and M40 groups in support of the affordable home ownership programmes.
On the hire purchase portfolio, Chong said the On the hire purchase portfolio, Chong said the bank grew by 4.5% in the first half of this year and its market share has expanded to 28.5% during the period.
On the small and medium enterprise (SME) front, Maybank is targeting double-digit growth of 21% in its financing for this year – higher than the 14.9% growth achieved in 2018.
The bank planned to disburse RM35bil for SME financing over the next three years.
According to AmBank Group CEO Datuk Sulaiman Mohd Tahir, it is not difficult for eligible customers to get a loan.
“At the end of the day, it is about customers affordability. I don’t think banks should lend to customers who do not have the capacity repay their borrowings,” he said.
He said the bank is increasing its lending activities as its loan growth last year was 6%, higher than the industry average of 4%.
At AmBank, SME loan growth was 21% last year, reaching a high of RM20bil for the segment alone while boarding on more than 15,000 new SME customers.
Sulaiman said bank was still lending to house buyers as mortgage loans formed a large portion of the bank’s lending and they are a major source of income for most banks.
“At AmBank, mortgage forms 33% of our total loans. We are growing our mortgage book at 12% y-o-y. In addition, we support PRIMA SPEF and BNM Affordable Schemes as part of our corporate social responsibility in promoting affordable homes for new buyers,” he said.
RHB Banking Group retail banking acting head Nazri Othman said mortgage and auto finance portfolio remained the bank’s main growth portfolio and it continued to achieve double-digit growth y-o-y.
“We are disciplined in granting mortgage lending and auto financing in accordance with our policies. Notwithstanding this, we continue to be vigilant in identifying emerging risks consistent with our risk appetite,” he said.
Balancing between lending and managing risk, Nazri said RHB Bank’s mortgage portfolio size was significant and as such, it conducts a series of portfolio management reviews regularly.
“This risk governance process has contributed to the improvement in quality of our loan portfolio. The bank continues to exercise discipline in granting new loans despite our growth strategy,” he said.
Asked if there was a need for the government to exert pressure on banks to lend, Nazri said for mortgages, RHB’s approval rate was growing at a steady pace.
The relevant ministries and government agencies were already playing their part in supporting the growth of the property market through various initiatives, including stamp duty waivers and working with banks to make home financing more accessible to first time buyers, he said.
Zafrul said: “We understand that the government is trying its best to facilitate home ownership for as many Malaysians as possible, especially those in the B40 and to some extent, the M40 category.
“Both commercial and government-controlled banks have a role to play in achieving this objective.
“CIMB Bank and CIMB Islamic are certainly doing our best to extend financing to as many eligible applicants as possible within our risk-return metrics that will also ensure the continued health of Malaysia’s banking and financial system,” he added.
Sulaiman said banks, as commercial and private entities, have an accountability to their shareholders and are governed by regulators. “Whilst the government has a larger agenda to support the country as a whole, banks that are controlled and managed by them are in a better position to do this as their interest is aligned,” he said.