KUALA LUMPUR (Oct 5): Banking industry loan growth improved from 5.9% year-on-year (end-July 2022) to 6.8% y-o-y (end-August 2022), with recorded improvement for household loans and business loans at end-Aug 2022, according to a CGS-CIMB report.  

Household loans improved from a 6.1% growth y-o-y in July to a 6.5% growth y-o-y in August, while business loans rose from 5.9% y-o-y to 6.7% y-o-y over the same period.

Despite the pick-up in loans, CGS-CIMB analyst Winston Ng maintained his projected loan momentum of 5%-6% for 2022F (forecast year 2022), as he foresees a slowdown in loan growth in 4Q 2022.

Industry gross impaired loan (GIL) ratio rose from 1.68% at end-December 2021 to 1.85% at end July 2022, on the back of loan defaults by borrowers impacted by Covid-19 and the negative impact of heightened inflation.

“However, there are signs of stabilisation in the GIL ratio, as it inched down from 1.85% at end-July 2022 to 1.84% at end-August 2022,” said Ng.

The analyst added that the largest beneficiaries of loan growth are Affin Bank Bhd, Hong Leong Bank Bhd (HLB) and Bank Islam Malaysia Bhd.

Affin Bank showed signs of strong loan growth of 15% y-o-y at end-June 2022, followed by both HLB and Bank Islam of 8% y-o-y.

CGS-CIMB also reaffirmed its “overweight” rating on Malaysian banks, based on the expansion in net interest margin and the decline in loan loss provisioning in 2022.

The report further pointed to the potential risk of an extension to the Cukai Makmur (prosperity tax) or another new tax on banks’ earnings.

“We estimate that the Cukai Makmur, which is imposed on companies’ FY22 (financial year 2022) pre-tax profit, will reduce Malaysian banks’ total net profit in CY22F (forecast calendar year 2022) by circa 8%,” CGS-CIMB said.