PETALING JAYA: Loans growth may slow down going forward owing to a combination of a high-base effect, stricter measures on credit card ownership and property lending. This was despite the 13.5% year-on-year (y-o-y) expansion of bank credit (after growing 13.2% in March).

Bank Negara’s statistical bulletin for April which was released on Tuesday showed that although loans expanded y-o-y fuelled by domestic demand, loan applications and approvals had slowed down compared with March.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that domestic demand remained the predominant growth driver, with business loans ratcheting up 14.1% growth while household credit demand sustained at 13.1%.

He said growth in loan applications and approvals moderated to 19.5% and 24% growth respectively (March: 37.5% and 44.7% respectively) due to a sharp slowdown in household loan applications for credit card on stricter credit card measures.

Business loan applications saw contractions in manufacturing, agriculture and education sectors while loan disbursements reversed to decline by 1.1% in April (March: 17.3%), due to lower disbursement to finance, retail trade and construction sectors.

“Owing partly to the high base effect, we expect loan growth to moderate towards year-end. We still maintain our loan growth estimate of 10% to 11% for this year,” Lee said.

ECM Libra Investment Bank Bhd research head Bernard Ching said although property loans remained the engine of loans growth, accounting for 38.2% of credit expansion year-to-date, this would not be sustainable.

He said despite monthly property loan approvals hitting another all-time high of RM14bil, this would not be sustained due to concerns over affordability amid high property prices and imposition of the loan-to-value cap.

For those buying a third property, Bank Negara recently imposed a condition that the buyer has to pay a 30% deposit against as little as a 5% deposit for a a first or second time purchaser.

“Overall loans growth going forward will also be dampened by further statutory reserve requirement (SRR - a portion of deposits that have to be kept interest-free by financial institutions with Bank Negara) hikes and imposition of further macroprudential lending measures by Bank Negara,” Ching added.

The central bank hiked the SRR by 200 basis points (100 basis points is one percentage point) to 3% via two increases of 100 basis points each in March and May absorbing some RM13.1bil.

Lee on the other hand believes that the central bank’s primary focus remains managing the build-up of excess liquidity.

“As such, we also expect another 100-basis point rise in the SRR ratio to 4% in July,” he added.