Friday 29 Mar 2024
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KUALA LUMPUR (Aug 8): CIMB Investment Bank Bhd said Malayan Banking Bhd (Maybank) had the highest loan-deposit (LD) ratio at 99.2% in the Malaysian banking sector as at March 2017 as the industry contended with slower deposit growth versus loan expansion.

CIMB analyst Winson Ng wrote in a note today that Malaysian banks' deposits grew 3.5% year-on-year in June compared to the industry's loan growth at 5.7%. Ng cautioned that the trend would impact the sector's loan expansion and margin.

"The weaker deposit growth (relative to loan growth) would be negative for banks. Firstly, this has been one of the contributing factors for the intense deposit competition among banks in the past 3 to 4 years, leading to higher cost of deposits and ultimately thinner margins. Secondly, this could partly cap the upside potential for loan growth as deposits (especially fixed deposits) are the primary funding for banks' lending.

"As at end-Mar 17, most local banks in Malaysia had LD ratios of close to or exceeding 90%. Among the local banks, Maybank's ratio was the highest at 99.2% at end-Mar 17 while three other banks had above-90% LD ratios. The lowest ratio at end-Mar 17 was the 80.3% for Hong Leong Bank, providing room for the bank to engage in active asset liability management to defend its margins," he said.

Due to weak deposit growth, Ng said the industry's LD ratio had risen in the past five years — from a low of 76.2% in February 2012 to 90.4% in June 2017.

"The ratio first touched the 90% mark in Nov 16 and it has been hovering around that level since then. If the deposit growth remains at the 3%+ level (or lower) and there is no drastic slowdown in loan growth, banks' LD ratios will continue to climb," Ng said.

 

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