KUALA LUMPUR – Loans in the banking system maintained a 3.9% year-on-year growth in May, mainly due to a higher household loans growth of 6.1%, rising with greater private consumption, while business loans ticked up 0.9% amid a soft environment.
Kenanga Investment Bank Bhd, in a research note today, said month-on-month (m-o-m), total growth was flattish at 0.3%, but led by better business loans of 0.4% driven by the manufacturing and retail sectors.
Household loans inched up 0.2% m-o-m, while loans disbursement declined 1.8% in the same period, with repayments taking a hit of 4.5% as the Covid-19 lockdown impedes economic activity.
Kenanga has revised downwards its loans growth expectation to between 3.0% and 4.0% from the 4.0% to 5.0% previously set for the 2021 calendar year, premised on a prolonged lull in economic activity impacting personal spending.
“The extension of the lockdown was anticipated given the persistence of Covid-19 cases, but this comes as a blow to banks,” it said.
“The newly announced six-month blanket moratorium, effective July 7, should help cushion the financial difficulties of affected individuals and businesses, but could come at the expense of some modification losses on the part of banks.”
As vaccination efforts progress, it said, more relaxed and “sustainable” movement controls could see economic activity normalising and moving towards recovery, but this is likely to materialise only in the fourth quarter.
It said economic growth could remain hindered should tight controls continue, delaying recovery prospects and possibly triggering the need for further provisioning by banks. – Bernama, July 1, 2021
