Moderating household loan growth likely

by **Cals** Sat 13 Jul 2013, 11:31

Published: Saturday July 13, 2013 MYT 12:00:00 AM
Updated: Saturday July 13, 2013 MYT 7:09:18 AM
Moderating household loan growth likely

PETALING JAYA: A moderating household loan growth of 10.5% is expected, on the fact that household debt is not a systemic risk, while household non-performing loans have fallen to 1.4% recently, said Maybank IB Research.
In a note to investors, the brokerage maintained its “overweight” rating on the banking sector, as it had already factored in moderating household loans.
It has “buy” calls on AMMB Holdings Bhd, BIMB Holdings Bhd,RHB Capital Bhd and Hong Leong Financial Group Bhd.
“Our projected industry loan growth of 10.7% this year assumes a household loan growth of 10.5% and a non-household loan growth of 11%.
“We forecast an industry loan growth of 10.2% in 2014, incorporating a moderation in household loan growth to 9.9% and a non-household loan growth of 10.6%,” it said.
It said growth of household debt had to be curbed, as it was one of the highest in the region at 83% of the country’s gross domestic product (GDP) as at end-2013.
“Malaysia’s household debt has expanded at a rate of 11.5% per annum over the past five years, outpacing the nominal GDP growth of 7.5% per annum,” it added.
It said loan growth remained firm at 12% to 13% amid rising house prices, which saw a 6% year-on-year increase in the first quarter of 2013, and therefore, further property cooling measures could not be ruled out.
Among others, the Treasury Housing Loan Division contributed to 12% of housing loans, non-banking financial institutions (NBFIs) contributed to 58% of total personal loans, loans to individuals for the purchase of non-residential property (NRP) made up about 43% of total banking system NRP loans, andAmanah Saham Nasional Bhd financing accounted for about 71% of loans for the purchase of securities, it estimated.
It opined that the risk lay with mortgages, as they made up 45% of houseshold debt, while transport vehicles registered at 18% and personal financing at 17%.
“We deem personal financing to be of medium risk, for it accounts for just 5% of total banking system loans.
“While NBFIs have been aggressive lenders, the default risk from this segment is largely offset by relatively secure payments under salary-deduction schemes, while Bank Negara’s recent move to cap personal financing tenures at 10 years should have the desired effect of curtailing demand,” it said.
Meanwhile, auto loans had also been deemed medium risk, as there were indications that demand was moderating, it added.