Steady Loan Growth in November

The banking system loans in Nov18 expanded by 0.4% mom (Oct18: 0.3% mom), and showed a yoy growth rate of 6.2% (Oct18: 6.0% yoy). The yoy growth was underpinned by sectors such as manufacturing, retail, business services, construction and households (residential properties, personal use, credit cards). The month of November saw a pullback in loan indicators (applications, approvals and disbursements), with a more notable contraction manufacturing, construction, wholesale/retail and real estate. We maintain NEUTRAL on the banking sector, with Maybank (MAY MK, BUY, RM9.50) and Aeon Credit (ACSM MK, BUY, RM15.30) our top picks.

Nov 2018 Loan Indicators Moderated

The banking system’s Nov18 loans continued to see a robust growth rate of 6.2% yoy (Oct18: 6.0% yoy), while sustaining a 0.4% mom growth rate. Based on the year-to-date growth rate of 5.0%, this translates into a loan growth of 5.5% for 2018, above our 2018 full year target of 5.0%. At this juncture, we keep our loan growth target of 5% unchanged, noting that loan disbursements may gradually decline towards the year end after a strong growth trend seen in 3Q18. Longer term, with new government policies after the Budget 2019 announcement, we expect consumer sentiment to gradually improve and drive consumption spending. Details of the Nov18 loan growth trends are as follows:

i) Business loan growth was up 0.4% mom and +6.8% yoy, as business activity picked-up (post-GE14). We saw stronger mom growth in the construction, retail and business services sectors. Real-estate, construction, wholesale/retail, business services and manufacturing were the key business sectors (collectively accounting for 33% of system loans) and key drivers on a yoy basis. According to MIER, there business expectation is also turning more pessimistic based on a reduction in the indices for capital investment (-7.2pts) and capacity utilization (-0.5pts) in 3Q18.

ii) Household loan growth was up +0.4% mom (0.4% mom in Oct18) and +5.7% yoy, in Nov18 driven by residential mortgages and personal financing. The auto loan approvals, which peaked in June-July 2018, continued to moderate in Nov18 (approvals -12.4% mom). New applications for passenger cars, residential property, personal use and credit cards also continued to contract mom in Nov18.

Source: Affin Hwang Research - 2 Jan 2019