KUALA LUMPUR – Banks will remain cautious on loan approvals, with the rate falling to 40.6% in the first quarter of 2021 from the 44.1% registered in the same period a year ago, said MIDF Research.
In a note today, it said this could be due to higher loan demand compared with last year, as banks may have been unable to keep pace with the approvals.
The banking system’s loan growth as at end-March rose at a slightly faster rate of 3.9% year-on-year (y-o-y) versus 3.7% the previous month.
Stronger industry performance was mainly contributed by the higher pace of growth for its top three loan segments, namely mortgage, auto and working capital, which expanded 5.5% y-o-y to RM1.24 trillion from 5.3% y-o-y to RM1.23 trillion the previous month.
As for loan demand, MIDF Research said the main drivers of the higher approvals are the purchase of passenger vehicles (up 22.7% y-o-y to RM12.7 billion) and residential properties (up 35.6% y-o-y to RM28.1 billion).
Loans approved for the purchase of non-residential properties also expanded strongly at 21.1% y-o-y to RM7.5 billion.
“Again, we view this as an encouraging sign. While banks may still be cautious, we do not believe it is at a level where credit will be curtailed in the system,” said MIDF Research.
Meanwhile, Maybank Investment Bank said the upside risks for improving loan growth and lower credit risk are stronger-than-expected economic growth this year due to improved liquidity, which will help sustain interest margins.
However, the downside risks are weaker-than-expected gross domestic product growth, which could lead to slower loan growth and asset-quality issues, potential interest rate cuts that may negatively impact interest margins in the short term, and a slowdown in current and saving account growth, which could exacerbate deposit competition. – Bernama, May 3, 2021
