• Broad money (M3) grew by 6.1% in September
• Higher loan growth in September
• Loan application jumped in September
• Higher loan approval rate; impaired loan declined
• Lower demand on household sector loan after the reimplementation of SST

Broad money supply (M3) remained robust in September and grew by 6.1% yoy, slightly lower than last month’s 6.4% yoy. The M3 rose above 6.0% for third straight month. The growth was mainly supported by the fixed deposit which accounted almost half (48.8%) of the total broad money, expanded by 8.8% yoy in September following 9.2% yoy registered in the preceding month. Meanwhile, demand deposit and saving deposits were up by 4.3% yoy (Aug: 4.9%) and 3.3% yoy (Aug: 3.1%) respectively in September. In contrast, negotiable instruments of deposits (NID) slipped by -7.5% yoy in September after rising 2.2% in the preceding month. On monthly basis, M3 inched up by 0.6% in September (Aug: 0.4%).

The narrow money supply or M1 eased to 4.1% yoy in September from 4.4% recorded in August. On monthly basis, M1 rebounded by 0.8% in September after declining for third consecutive months (Aug: -0.04%; Jul: -1.3%; Jun: -0.2%).

Higher loan growth. Loan growth picked up by 5.7% yoy in September following a 5.4% rise in the preceding month. It continued to expand above 5.0% for fourth month in row and again marked the highest growth since August 2017 (5.8%). The significant increase was driven by both business and household sector which rose by 5.4% (Aug: 4.4%) and 6.0% (Aug: 6.1%) respectively in September. More than half of the total loans or 57.3% were held by household sector. The expansion was supported by the following purpose; purchase of residential property (+8.0%), purchase of nonresidential property expanded (+2.0%), purchase of passenger cars (+0.4%), purchase of securities (+7.3%), personal use (+8.0%) and credit card (+3.7%). The loan growth for purchase of securities and personal use have accelerated in the past few months and the former reached it’s highest since Jan 15 (8.2%) whilst the later since Apr 13 (8.6%).

The major business sectors which pushed the higher loan growth in September were wholesale, retail, restaurants & hotels (+5.8%), real estate (+4.1%), financing, insurance & business services (+5.4%), manufacturing (+6.3%) and construction (+15.6%).

On monthly basis, total loans were up by 0.58% in September from an increase of 0.63% recorded in the previous month.

The loan applications jumped by 6.1% yoy in September after posting a rise of 5.3% in the preceding month. The significant rise was driven by the expansion of application in the following sectors; manufacturing (+29.6%), construction (+22.6%), education, health & others (+411.5%), retail trade (+31.1%), primary agriculture (+163.3%) and mining & quarrying (+766.9%). In contrast, the loan application from real estate and wholesale trade contracted by -5.7% yoy and -24.0% yoy respectively.

In addition, the loan applications for household sector plunged by -4.2% yoy in September after rising by 3.9% in a month before. The contraction of loan application growth in September was mainly due to the lesser demand for purchase of residential property (Sep: - 2.6%; Aug: 3.0%), purchase of non-residential property (Sep: -0.2%; Aug: 19.8%), personal uses (Sep: -2.9%; Aug: 6.6%) and purchase of passenger cars (Sep: -20.7%; Aug: 9.1%). Meanwhile, the loan demand on credit cards eased to 2.4% yoy in September from 5.0% recorded in August.

On a monthly basis, loan application stumbled by -10.9% yoy in September after an increase of 6.8% posted in the prior month. Demand from the household sector fell by double-digit in September -23.1% yoy following 1.5% decrease in August. Bulk of the total loan applications came from household sector (49.9%).

Source: BIMB Securities Research - 1 Nov 2018