Banking sector records highest loans growth since Asian financial crisis
January 04 2011
Source :Borneo Post Online
KUCHING: The latest statistics pertaining to the banking industry showed that overall loans growth figures had recorded a 13.2 per cent year-on-year (y-o-y) uptick in November 2010.
ON TRACK: The banking sector is on track to sustain its commendable performance so far in 2010 into 2011.
In its research report, AmResearch Sdn Bhd (AmResearch) noted while this figure was positive, it still represented a decline of 7.6 per cent y-o-y from the previous month.
The slower growth came from a lower rate of increase of 16.2 per cent y-o-y in November 2010 for the retail segment, with the residential mortgage sector growth tapering off to 2.7 per cent y-o-y compared with October 2010’s 12.2 per cent y-o-y figure.
The research house opined that this situation arose from the implementation of the new loan-to-value (LTV) ruling which limited LTV ratios for third properties and above to 70 per centon November 4, 2010.
On another note, the corporate segment’s rate of increase was also lower at 8.2 per cent y-o-y, down 9.7 per cent y-o-y from the preceding month. This was largely due to a decline in construction loans which recorded minus 20.1 per cent y-o-y in November 2010, but the research firm was neutral on this aspect as this figure came on the back of 11 consecutive months of robust growth in excess of 40 per cent y-o-y for this particular segment.
Comparatively, the working capital sector was back on track with a 29.5 per cent y-o-y growth after putting up a minus 11 per cent y-o-y performance in October 2010.
AmResearch believed leading loan indicators remained at comfortable levels considering that the absolute levels of both loans applications and approvals stayed close to peak levels.
Furthermore, it said that the slowdown in the residential mortgage loan segments were nothing to worry about given that household debts had risen significantly over the past year. It also mentioned that future growth was expected to be partly driven by the execution of projects under the government’s Economic Transformation Programme.
Where overall deposits were concerned, the relevant growth figures were 8.5 per cent y-o-y in November in addition to an almost unchanged loan-to-deposit ratio at 77.4 per cent y-o-y compared with 77.7 per cent y-o-y in October.
On a segmental basis, growth from business enterprises decelerated to three per cent y-o-y but was offset by a stronger growth of 7.8 per cent y-o-y from individual deposits.
The research house was still positive on overall deposit growth given that this was sustained by a stronger expansion in both the fixed deposits and individual segments.
Average lending rates were stable at 4.99 per cent in November 2010 and were positive in the research house’s opinion considering the unexpectedly large dip of minus 10 basis points (bps) month-on-month in October 2010.
To recap, Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25bps each on March 4, May 13 and July 8 last year. Thus, November 2010 would be the fourth month following the last rate hike and also the first time in three months that average lending rates had not declined on an m-o-m basis.
The stable average lending rate was thus positive and could indicate easing net interest margins pressure ahead.
AmResearch noted that despite the slower pace of growth seen in leading loan indicators for November 2010, it believed these were at comfortable levels considering loan applications and approvals in quantum term had stayed close to peak levels.