• Broad money (M3) stable in April

• Loan growth was steady on annual basis

• Loan application grew at a slower pace yoy and plunged on mom

• Impaired loan increased on yearly and monthly basis

Broad money (M3) registered a steady annual growth of 4.4% in April (Mar: 4.5%). However, on monthly basis, it dropped by 0.2% or RM3.4bn from a positive growth of 0.9% recorded in the previous month. The growth of narrow money supply or M1 increased 11.0% yoy or RM38.4bn as compared to previous month, stood at 9.2%.

Stable loan growth. Loans growth for the banking sector was steady at 6.1% yoy (Mar: 6.0%). The growth was primarily driven by higher growth of loans to businesses other than SMEs (Apr17: 5.5%; Mar17: 4.9%). Higher business loan growth was supported by working capital financing. Household loans growth was stable in April, stood at 5.1% from 5.2% in a month earlier. Household sector hold about 57% over total loan recorded in April. On a monthly basis, total loans grew at a slower pace of 0.02% as compared to a significant growth logged in the prior month, 0.57%.

The loan applications and approvals grew at a sluggish rate in April 2017. On yearly basis, the loan application grew at 0.6% in contrast with a higher growth recorded in the previous month (6.3%). In terms of monthly basis, it slumped 15.6% from 25.2% in March. Bulk of the total loan applications came from household sector (59%). Majority of the sectors showed a lower loan demand in both, monthly and yearly basis. In a contrary, the loan application from research and development spiked in April. It stood at 669.2% yoy and 877.6% mom. As compared to the previous month, the loan application from financial intermediation increased higher at 267.4% mom (Mar: 7.0%) and surge up to 50% yoy (Mar: -88.1%).

Declining approval rate. The approval rate by banks slowed to 42.0% in April from 46.9% the month before. Month on month amount for total loans approved was lower at RM27.2bn from RM35.9bn in March. Bulk or 27.5% of total loan approved were for purchase of residential property while working capital hold 21.3% over total loan approved.

Gross impaired loans. The banking sector’s non-performing loans in April rose 9.7% from 7.5% in March. On monthly basis, it registered a higher growth at 2.1% compared to previous month, at 0.3%.

As at April 2017, total impaired loans amounted to RM25.5bn, which was greater from last month’s RM24.9bn. Impaired loans from the household sector increased to RM9.32bn from March’s figure of RM9.08bn.

Loan ratios stable. Deposits grew slightly higher at 3.5% yoy from 3.3% in March. Nevertheless, on a mom basis, the deposit growth declined by 0.3% compared to a higher growth of 0.9% posted in March. The banking system’s loan-deposit ratio remained stable at 88.8% in April, same as figure in March. This was further reflected in BNM’s alternative banking sector liquidity indicators including the loan to-fund ratio which was also unchanged at 82.8%.

Source: BIMB Securities Research - 1 Jun 2017