• Broad money (M3) moderated to 6.4% in August

• Slightly higher loan growth in August; 5.4% yoy

• Loan application picked up in August; 5.3% yoy

• Loan approval rate was lower, whilst impaired loan increased

• Maintaining loan growth target for 2018

Broad money supply (M3) moderated to 6.4% yoy in August following 6.6% increase in the preceding month. Fixed deposits, which accounted for 48.7% of the total broad money rose by 9.2% yoy after growing 8.7% in the last months. Demand deposits inched up 4.9% yoy in August from 4.7% in July while saving deposits eased by 3.1% (Jul: 3.7%). In addition, negotiable Instruments of Deposits (NID) continued to increase in August but on the lower rate as compared to July’s gain (Aug: 6.5%; Jul: 2.2%). On monthly basis, M3 expanded by 0.4% in August (Jul: 0.5%).

The narrow money supply or M1 tapered to 4.4% yoy after increasing 4.7% for two consecutive months. On monthly basis, M1 slightly dropped by -0.04% in August from -1.3% a month before.

Slightly higher loan growth. Loan grew by 5.4% yoy in August, slightly higher than previous month’s 5.3% increase. Again, it marked the highest growth since August 2017 (5.8%). The significant expansion was still driven by both sector; household and business sector which rose by 6.1% (Jul: 6.0%) and 4.4% (Jul: 4.3%) respectively in August. More than half of the total loans or 57.4% were held by household sector. The significant increase was supported by the following purpose; purchase of residential property (+8.2%), purchase of non-residential property expanded (+2.5%), purchase of passenger cars (+0.3%), purchase of securities (+7.2%), personal use (+7.8%) and credit card (+4.9%). The loan growth for credit card was at the highest since March 2015 (5.0%). Besides that, the loan growth for working capital also showed a significant increase as it rose by 2.9% for two consecutive months from 2.3% in June.

Other main business sectors that contributed to the higher loan growth in August were wholesale, retail, restaurants & hotels (+5.1%), real estate (+6.3%), financing, insurance & business services (+2.5%), manufacturing (+6.6%) and construction (+14.7%). On monthly basis, total loans increased by 0.6% in August from an increase of 0.2% recorded in the previous month.

The loan applications picked up 5.3% yoy in August after posting a slower growth of 1.7% in the prior month. The significant rise was propelled by the expansion of application in the following sectors; education, health & others (+504.0%), manufacturing (+10.1%), real estate (+17.0%), wholesale trade (+13.4%), restaurants & hotels (+29.2%) and primary agriculture (+159.8%). However, the loan application growth for manufacturing sector (Jul: +22.6%) and wholesale trade (Jul: +17.1%) registered slower pace of growth in August as compared to the previous month’s figure. In contrast, the loan applications for household sector slowed by 7.0% yoy in August from 14.7% rise recorded a month before. The moderation of loan application growth in August was mainly due to the lower demand on buying residential property (Aug: 3.0%; Jul: 14.5%) and purchase of passenger cars (Aug: 9.1%; Jul: 33.6%). Meanwhile, the loan demand for personal uses and credit cards picked up in August; 6.6% (Jul: 5.7%) and 5.0% (Jul: 2.8%) respectively.

On a monthly basis, loan application surged 6.8% in August from 4.6% rise logged in the previous month. Demand from the household sector fell 1.5% mom in August after a significant increase of 15.5% registered in July. Bulk of the total loan applications came from household sector (56.8%).

Source: BIMB Securities Research - 1 Oct 2018