• Mar21 saw system loan growth at 3.9% yoy while on a ytd-basis, up 1.2%. Loans indicators such as approvals and disbursements, continued to gain traction in March
• On the other hand, we continued to see system impaired loans creeping up, +2.2% ytd, attributable to the household, wholesale/retail/hotel, financing and transportation sectors
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Domestic Credit Demand Grew 3.9% Yoy and +0.7% Mom; +1.2% Ytd

On a yoy basis, banking system loans grew by 3.9% underpinned by more robust demand in the healthcare and wholesale/retail/trade sectors, which needed additional loans to handle challenging conditions or cope with an unexpected surge in demand (such as e-commerce business, warehousing, delivery services, medical equipment/devices) during the COVID-19 pandemic. On a segmental basis, household loans expanded by 5.7% yoy while business loans grew by a marginal 1.1% yoy as this was partially offset by repayments of corporate loans. Overall, loan indicators gained traction, as implied by more robust applications and approvals, while loan disbursements have been robust to the business sectors.

Details of March Loan Growth Trends

i) Business loans saw a more robust growth of 1.3% mom as we noted stronger disbursement activities, notably in sectors such as manufacturing, wholesale/retail, and financing activities (share-margin related, money-lending).

ii) Household loans grew 0.4% mom, mainly driven by higher disbursements for residential mortgages, auto and personal financing. New loan approvals also have been strong in these segments.

Gross impaired loans crept up 2.2% ytd; GIL ratio remained stable at 1.58%

System impaired loans crept up 2.2% ytd, largely underpinned by the household (+3.5% ytd), wholesale/retail, restaurants, hotel (+9.4% ytd), financing activities (+3.7% ytd), transportation (+3.7% ytd) and manufacturing (+2.5% ytd) sectors. We note that banks continued to set aside provisions in Jan-Mar21 in respect of the rising impaired loans and as additional buffers. GIL ratio however, had remained stable at 1.58% in Mar21 vs. the level in Dec20 at 1.57%, due to expansion in the system loan base.

Source: Affin Hwang Research - 3 May 2021