MALAYSIA’S banking sector, which has seen marginal slowdown in both business and household segments, may see a revival in loan growth for the rest of year.
Hong Leong Investment Bank’s research unit (HLIB) said loans growth slowed by two basis points to 8.61 per cent year-on-year on marginal slowdown in both business and household segments, but August statistics had shown strong business leading indicators.
“Strong business leading indicators reaffirm our view that the ongoing Economic Transformation Programme (ETP) and the commencement of Refinery and Petrochemical Integrated Development (Rapid) projects will revive business loan growth. This will help to mitigate the expected slowdown in household growth. Thus, we are keeping our 2014 loan growth projection at nine per cent,” it said in a report yesterday.
HLIB said applications and approvals had been higher month-on-month and reversed to year-on-year growth, but approval rate was slightly lower.
“Business applications have been strong in the fourth consecutive month, registering the third consecutive double-digit growth, while the approvals increased.”
It noted that the banking sector is the best proxy to the impact of ETP and Rapid (sector with third-highest multiplier effect), domestic consumerism (albeit slower) and economy, strong asset quality, robust capital ratios, capital management and mergers and acquisitions.
HLIB pointed to the competitive pressure on margins, the potential of higher living costs that will increase the possibility of a rise in delinquencies, the portfolio losses from foreign outflows and the rising burden of the low-income group.
It has maintained its “neutral” call on the sector, with Malayan Banking Bhd, RHB Capital Bhd and Alliance Financial Group Bhd being its top picks.