Property loans growth may taper off

ECM Libra Investment Research expects the loans growth to taper off in anticipation that property sales growth may slow down in late 2011.

Residential and non-residential property loans which accounted for 44 per cent of loans growth in 2010 are already showing signs of growth moderation, it said in a research note today.

Residential loan approval has contracted 3.8 per cent year-on-year in December while non-residential loan approval slowed to 30.2 per cent from 47.3 per cent in November.

"Loans growth will also be dampened by an impending statutory reserve requirement (SRR) hike and imposition of macroprudential lending measures as guided by Bank Negara Malaysia in its latest monetary policy statement on Jan 27," said ECM Libra.

In the near term, it said, loans growth is expected to remain intact as lending indicators continue to be in positive territory with loans application and approvals in December 2010, increasing by 36.5 per cent and 17.4 per cent year-on-year, respectively.

"That said, loans disbursement contracted by 2.8 per cent year-on-year in December," it added.

Loans grew by 12.8 per cent to RM883.6 billion in 2010.

Both household and business loans growth moderated in December at 13.4 per cent and 12.1 per cent, respectively.

The loan-deposit ratio remains high at 81.4 per cent from Nov 10 at 81.3 per cent, which is close to the seven year high of 81.7 per cent reached in Oct 10.

"This was due to deposits growing at 7.3 per cent as compared to the loans growth of 12.8 per cent. We believe the lagging deposit growth may curb loans growth momentum going forward," ECM Libra said.

ECM Libra said it has maintained the neutral call on the banking sector as loans growth is tapering while net interest margins is under pressure going forward.

Meanwhile, OSK Research Sdn Bhd has maintained its view of loans growth for 2011 as remaining robust, with the rise in interest rates from record lows unlikely to dampen pent-up credit demand spurred by a recovering economy.

"The banking system's capitalisation remains sufficient, with the risk weighted capital and core capital ratio, standing at 14.6 per cent and 12.8 per cent, respectively," it added.