• Broad money (M3) expanded by 4.0% in April
• Loan growth remained stable in April

• Household loan growth slowed further

• Marginal increase in total deposits growth

• Loans growth will be sluggish on the impact of MCO and weak economic outlook

Money supply (M3) growth picked up (Apr: +4.4% yoy; Mar: +3.7%) on residual impact SSR cut and rising reserves which increased USD0.8bn to USD102.5bn as at end-April (end-Mar: USD101.7bn)) despite slower credit and deposit growth. Growth was supported by M1 (Apr: +9.6%; Mar: +7.9%), outpacing growth in narrow quasi money (Apr: +3.1%; Mar: +2.5%) and a further declined in deposits placed at other banking institutions (Apr: -15.2%; Mar: -17.3%). On monthly basis, M3 rebounded at a fastest pace in 4 months (Apr: +1.3%; Mar: +0.5%).

Growth in M3 was due to an expansion in public spending which outweighed a moderation in private spending and net external reserves. Net claims on government (Apr: +34.2%; Mar: +25.8%) surged to a 11-month high on a significant increase in credits extended to the government (Apr: +19.1%; Mar: +11.0%), probably to finance part of the PRIHATIN economic stimulus package. Claims on the private sector (Apr: +4.0%; Mar: +3.9%) increased marginally on higher holdings of securities (Apr: +4.1%; Mar: +3.1%) by the banking system. There was a turnaround in the net external reserves (Apr: +1.8%; Mar -2.9%) supported by those of the banking system (Apr: - 11.1%; Mar: -30.4%).

Loan growth remained stable at nine-month high (Apr: +4.0%; Mar: +4.0%). Loan growth by purpose were driven by higher growth in loans for working capital (Apr: +4.9%; Mar: +3.5%) as businesses seek to cushion the impact of the Covid-19 and Movement Control Order (MCO). Corporate loans growth jumped during the month (Apr: 5.1% yoy; Mar: +4.4%), as higher growth of loans extended to the agriculture, manufacturing, transport & storage, and financing, during the month.

Source: BIMB Securities Research - 1 Jun 2020