Banking loan growth remains strong: MIMB

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Loan growth in the Malaysian banking sector remains strong, despite an increase in the base lending rate (BLR) and average lending rate (ALR) recently, according to a research house. MIMB Investment Bank said the gross banking system’s outstanding loans were higher in April this year with loans applied and loans approved, increasing compared to previously across both business and household sectors.

 

"For household loans, the demand to purchase residential property rose 10.7 per cent year on year (YoY) and that for personal use increased 19.5 per cent," it said in a research note today.Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) for the second time last month by another 25 basis points to 2.5 per cent, in another move to normalise the monetary condition. The research house said the total loan in the banking system grew 10.0 per cent YoY in April this year vis-a-vis the 9.8 per cent in March.

It said the growth was in-line with its 2010 total loan growth forecast of 9.9 per cent on the back of the higher end, real gross domestic product (GDP) growth estimate of 5.9 per cent. However, MIMB did not rule out that such strong loan growth, despite the interest rate hike, could be due to an attractive loan pricing offered by banks given the underlying keen competition. "This can be seen in the narrower estimated interest spread of banks that has not improved in tandem with a higher ALR. The estimated interest spread of banks declined 17 basis points (bps) to 2.65 per cent from 2.82 per cent in Febrary 2010," it said.

On the OPR, the research house said: "It is not a surprise to see the OPR increase further as it is still at the lower-end of the historical range since end-2004." It said the average OPR was approximately at 3.0 per cent, 50 bps higher from the current level but the central bank might pause the hike due to the sovereign debt problems in Europe. MIMB said BNM is likely to maintain the OPR at the current level in the forthcoming Monetary Policy Committee (MPC) meeting in July.

Bernama