• Broad money (M3) accelerated in August

• Loan growth was slightly higher on yearly basis

• Loan application grew at slower pace

• Loan approval rate increased

• Impaired loan growth picked up in August

• Loan growth momentum continues

Broad money accelerated for third consecutive months to 5.3% in August (Jun: 4.3%; Jul: 4.8%). Fixed deposit, which contributed 47.5% to the total broad money, increased 3.8% in August. Demand deposit and saving deposit grew 9.9% and 7.2% respectively in August whilst negotiable instruments of deposit (NID) rallied to 8.6% in August after decline for two months in row (Jun: -2.7%; Jul: -11.9%).

On monthly basis, the growth rebounded to 0.6% or improved by RM9.9bn in August after two months of negative growth (Jun: -0.4%; Jul: -0.3%). The narrow money supply or M1 stable at 10.9% yoy in August alike the previous month.

Slightly higher loan growth. Loans growth for the banking sector increased slightly higher to 5.8% yoy from 5.6% in the previous month. The better loan growth was supported by businesses, with expansion in the construction (Jul: 9.5%; Aug: 12.5%), and finance, insurance and business service (Jul: 5.3%; Aug: 5.6%) sectors. Electricity, gas and water supply surged 15.6% in August as compared to 3.2% registered in the previous month.

Household loans growth stabled at 5.0% in August, unchanged since June 2017. Household sector hold about 57.0% over total loan recorded in August. Purchase of consumer durables goods slowed down to 1.0% from 4.4% posted in the earlier month. Moreover, the purchase of residential property grew marginally lower at 8.8% from 8.9% in July. In contrast, loan growth in credit card increased 2.4%, slightly higher than July (2.3%).

On monthly basis, total loans surged 0.5% in August as compared to the previous month growth which stood at 0.06%.

The annual growth of loan application normalized to 4.1% in August after increased significantly at 22.9% a month before due to a festivity season. The slower growth was mainly underpinned by the household sector that impeded by 9.0% yoy in August after recorded an outstanding growth of 28.6% in July. Purchase of passenger cars and non-residential property dropped 5.9% (Jul: 19.7%) and 7.8% (Jul: 11.5%) respectively in August. The sluggish growth of the loan application was also prompted by the construction sector as it declined 38.1% in August as compared to July that posted the remarkable growth of 86.5%. Furthermore, the demand on loan application for majority of the sectors were lower in August as compared to the prior month.

Likewise, on monthly basis, the loan application growth hampered to 3.1% from 16.5% registered in July. Demand on the household sector grew 7.2% mom, lower than the previous month growth at 14.2%. Bulk of the total loan applications came from household sector (57.6%).

Source: BIMB Securities Research - 2 Oct 2017