Banks tighten lending rules amid uncertainty

KUALA LUMPUR: The competitive environment for loans by banks will
likely abate in the months ahead despite a general slowdown of loan
growth which is expected this year, analysts said.
This is
because banks in Malaysia are also expected to put their own interest
first and extend loans to the consumer sector more cautiously given the
uncertain backdrop amid the economic turmoil in the US and eurozone.
“It
is quite normal to be more cautious as dark clouds gather over the
horizon. However, I don't expect the slowdown to be as bad as it was
back in 2009 when the sub-prime crisis hit the US,” said a banking
analyst from one of Malaysia's top three banks by market capitalisation.
“Given the state of the global economy, it is timely that Bank Negara
imposes stricter rules on lending to continue to keep lending
activities in the country at a healthy state. A healthy banking system
will only ensure a healthy economy,” the analyst added.
Bank Negara's more stringent revised lending rules came into effect on Jan 1.
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Data released by Bank Negara showed that loan growth in November 2011
moderated further to 12.8% from a 13.1% and 13.8% growth in October and
September 2011 respectively
Effective this year, the
debt service ratio of a loan applicant is calculated based on the
person's net income rather than gross income, which means the calculated
income of the applicant is based on his or her take home salary after
tax deduction and Employees Provident Fund contribution.
The softening competition for loans also means that loan growth is likely to slow further from the preceding two months.
Data
released by Bank Negara showed that loan growth in Nov 2011 moderated
further to 12.8% year on year (yoy) from a 13.1% and 13.8% yoy growth in
October and September 2011 respectively.
CIMB Investment Bank's
analyst Winson Ng had in a report on the sector outlook said that there
was still a downside to the industry's loan growth even though it had
declined for the two months.
“We are projecting total loans
growth of 12-13% for 2011, followed by a softening to 9-10% in 2012 when
consumer loans are expected to increase 10-11% and business loans are
expected to advance by 8%-9%,” Ng said in his report.
Despite the apparent slowdown in loan growth, Maybank Investment Bank
said that the scenario might not be as bad as it seems because there
was a pick-up in loan applications and approvals, with a slight
improvement in spreads in November 2011.
Maybank analyst Desmond
Ch'ng said that the total system loan growth in 2012 was expected to
slow further to 9.4% while loan growth was expected to be at 12.4% in
2011.
Meanwhile, RHB Investment Bank
said in a report that Bank Negara could resort to cutting interest
rates should global economic conditions deteriorate further and that it
expected Bank Negara to employ a more proactive approach to “begin
cutting interest rates sooner rather than later.”
RHB said that based on its sensitivity analysis, the Alliance Financial Group Bhd and Malayan Banking Bhd would be more adversely impacted by a cut in interest rates due to their higher proportion of variable-rate loans.