PETALING JAYA: Malaysian banks have generally seen an acceleration in loan growth as lockdown measures eased and the wider economy reopened late last year.
According to AmInvestment Bank Research, this trend continued in January, where domestic loan growth averaged 4.7% year-on-year (YOY) on the back of an accelerating pace of lending to households and to a stronger dynamic in the financing of working capital.
Overall banking sector loan growth in the fourth quarter of 2021 accelerated to 5% year-on-year, from 3.7% year-on-year growth in the third quarter.
Among banks, the research house noted that Malayan Banking Bhd(Maybank) loan growth picked up momentum to record 5.7% year-on-year growth in the fourth quarter of 2021.
“CIMB Group Holdings Bhd.Gross loans grew at a faster pace of 3.3% year-on-year, supported by growth in consumer, commercial and wholesale bank loans,” he said.
For RHB Bank Bhd, the research firm said its lending grew 6.7% year-on-year, driven by mortgages, hire-purchase, small and medium-sized businesses, commercial loans and growth in Singapore segment loans.
RHB’s domestic lending grew 4.8% year-on-year, slightly outpacing the sector’s 4.5% year-on-year growth.
AmInvestment Bank Research also noted that there was a slight increase in the gross impaired loan ratio for banks that were under its cover to 1.75% in the fourth quarter from 1.70% in the third quarter.
“The percentages of bank loans with repayment assistance have declined with a high percentage of borrowers for repayment assistance loans expiring in January 2022 making repayments,” he said.
“Applications for the Urus financial aid program have been extended until the end of March 2022. Nevertheless, the participation rate in the program has remained low.
“We continue to see provisions decline due to the downward trend in outstanding loans that required repayment assistance and the improving asset quality outlook for banks,” he noted.
Meanwhile, on the earnings front, the research house said the sector’s calendar-based core earnings growth for 2022 is now revised to 9.6% growth from 10% previously, largely after adjusting its net interest margins and its cost of credit assumptions for banks.
He also expects profit growth for banks covered by his hedge to be flat at 0.8% for 2022 due to Cukai Makmur’s additional taxes.
“We maintain our overweight position in the sector, with the upward trend in interest rates benefiting banks’ interest income with lower provisions ahead, supported by potential reversals in the management overlays of an upward trend. improving loans under repayment assistance,” he said.