PETALING JAYA: The Malaysian banking system’s total loan growth improved marginally in January 2017 from a month earlier as business loan growth which has picked up offset the slowdown in the domestic household loan growth.

The industry’s total loan volume in January 2017 grew by 5.6% year-on-year (y-o-y) in contrast to the marginally lower 5.3% growth one month earlier. In January 2017, business and household loan grew by 5.4% and 5.2% respectively.

Maybank IB Research said that the slowdown in household loan growth was primarily attributed to weaker growth in loans for the purchases of residential properties and the drop in passenger car loans which has been down since July 2016.

“Meanwhile, the higher growth in the banking system’s total loans together with net outstanding corporate bonds contributed to the quicker private sector financing growth of 5.8% y-o-y in January 2017,” said the research house.

To note, in January 2017, loan applications continued to contract and was 8.4% lower y-o-y while loan approvals declined by 5.1% yoy.

“However, with regard to the month’s deposit growth, the industry saw a 2.6% yoy growth in total deposits, higher than the 1.5% growth recorded in December 2016.

“While business enterprises’ deposits continue to contract but at a lower rate of decline at 0.3% y-o-y, the individual deposits expanded with a higher growth rate of 6%,” said AmInvestment Bank in its note.

The research unit which retained its “neutral” recommendation on the sector, issued “buy” calls particularly on CIMB and RHB Bank stocks due to their compelling valuations and decent return on equity, among others.

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