KUCHING: The recent release of banking statistics for December 2010 was seen by analysts as a good round-up for 2010’s sector loans growth.

DAMPENED GROWTH: Ching notes that loans growth will also be dampened by the impending SRR hike and imposition of macro-prudential lending measures as guided by Bank Negara Malaysia in its latest monetary policy statement on January 27.

Analysts from HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) highlighted that loans grew by 12.8 per cent year-on-year (y-o-y) in 2010, supported by both the business (increase by 14.1 per cent) and retail (increase by 11.5 per cent) segments.

“Within the retail segment, mortgages, hire purchase and credit card loans grew by 13.2 per cent, 7.7 per cent and 14.2 per cent respectively,” added analysts Lim Sue Lin and Hon Seow Mee.

Despite banks adopting the FRS139 last year, both analysts affirmed that asset quality remained robust with a gross non-performing loan (NPL) ratio at 3.2 per cent.

In a separate research report, the research team at OSK Research Sdn Bhd (OSK Research) noted that weaker purchase of fixed assets other than land and building led to slower business growth while lower purchases of passenger cars was the major drag in household loans.

Looking forward, ECM Libra Capital Sdn Bhd’s (ECM Libra) head analyst Bernard Ching believed that loans growth was expected to taper off due to the research firm’s expectations that property sales growth might slow down in late 2011.

“Loans growth will also be dampened by impending statutory reserve requirement (SRR) hike and imposition of macro-prudential lending measures as guided by Bank Negara Malaysia in its latest monetary policy statement on January 27,” Ching affirmed.

On the other hand, HwangDBS Research’s Lim and Hon expected high-impact projects to generate a large multiplier effect to the economy and spur business and consumer spending, thus supporting overall loans growth.

“Based on that, we expect loans to grow at 13 per cent, driving net interest income to grow at eight per cent amidst the competitive NIM environment,” they suggested.

Meanwhile, projects under the Economic Transformation Programme would drive more fund raising activities, while merger and acquisition transactions could surface with further divestments of government-linked companies (GLCs).

“We expect the robust capital markets to spur higher non-interest income for banks by about 17 per cent for 2011,” the analysts concluded.

This view was shared by the research team at OSK Research as the rise in interest rates from record lows was unlikely to dampen pent-up credit demand spurred by a recovering economy.