KUCHING: The banking sector has seen loans growth go from strength to strength based on April figures with loan bases growing by 10.0 per cent year-on-year (y-o-y) and 0.6 per cent month-on-month (m-o-m) to RM810.4 billion.
According to ECM Libra Capital Sdn Bhd (ECM Libra), loans growth was at 3.4 per cent year-to-date (YTD).
It added that loans had grown by 10.3 per cent YTD on an annualised basis which was slightly higher than its expectations of eight per cent to 10 per cent growth for the calendar year 2010 (CY10).
The household sector accounted for 70.8 per cent of YTD loan growth and expanded 4.4 per cent compared with business loans which grew by 2.2 per cent YTD.
A detailed analysis of the figures showed the continued strong household loans expansion was mainly due to loans extended for the purchase of residential property which expanded 3.9 per cent YTD.
The research house noted than lending indicators all pointed towards further loans expansion in the coming months as loan applications, approvals and disbursements in April 2010 had increased by 26.8 per cent, 26.7 per cent and 17.5 per cent y-o-y, respectively.
On the other hand, deposits declined by 0.4 per cent m-o-m to RM1,064.8 billion while its y-o-y growth lacked behind that of loans growth at 8.1 per cent.
Consequently, loan-deposit ratios increased to 79.9 per cent compared with 77.9 per cent in April 2009 and 79.1 per cent in March 2010. Furthermore, the research firm reported financing-deposit ratios increased to 86.5 per cent compared with 85.3 per cent in April 2009 and 85.5 per cent in March 2010.
Besides, the average lending rate (ALR) continued to fall in April to 2.65 per cent despite a 25 basis points (bps) overnight policy rate (OPR) hike in March. ECM Libra said ALR-savings account spread had bounced back since hitting a low of 3.97 per cent in December 2009 and stood at 4.07 per cent in April.
The competitive landscape suggested that interest margin expansion as a result of the OPR hike would not be uniform across the banking sector, the research house highlighted.
In addition, net non-performing loans (NPL) ratios remained unchanged at 1.84 per cent while loan loss coverage improved to 97.8 per cent.
OSK Research liked CIMB Group Holdings Bhd for its regional as well as its strong non-intrest income growth.
It was also of the opinion that Public Bank Bhd continued to have superior earnings return on equity and asset quality.
On Malayan Banking Bhd’s prospects, the research firm said it would finally allay sceptics’ concerns when it continued reporting strong quarterly profits going forward.
The research house expected credit expansion, return of capital market transactions, interest rate expansion and slide in credit costs to drive earnings growth in 2010.