Today's Pick (04/05/12/077/771) Bank Negara's loan guidelines begin to have desired effect

Bank Negara's loan guidelines begin to have desired effect

KUALA LUMPUR: Bank Negara Malaysia's (BNM) prudent lending guidelines for banks, which kicked in this year, amid much controversy, are starting to have the desired effect of slowing down growth in higher risk consumer loans.

Analysts noted that the latest banking system monthly loans data released by the central bank for March showed clearly that the guidelines had helped moderate loan growth in areas, like hire purchase, personal loans and credit cards.

"Trends in January and February were distorted by the festive seasons and fewer working days.

"The results in March, on the other hand, would allow us to conclude that BNM's prudent financing guidelines are beginning to have the desired effect of moderating loan growth in the higher risk segments," said an analyst at Maybank Investment Bank Research (MIB).
Loan growth in the household segment moderated to 11.9 per cent in March from a year ago, compared to a figure as high as 13 per cent in December 2011.

The reason for this is that hire purchase and personal loans continued to slow.

However, demand for residential and non-residential property loans remained solidly entrenched.

Automotive companies were not happy when BNM's rules, which resulted in stricter processes, came into place this year as they were worried it would hurt car sales.

The pace of loan growth for passenger vehicles slowed to 5.4 per cent in March, compared with 5.6 per cent in February and 6.2 per cent in December.

On the whole, banking loans expanded by 12.2 per cent in March, compared with 11.9 per cent in February.

"Lending appears to be trending in the right direction at this stage, with household loan growth moderating and non-household loans picking up the slack," the MIB analyst said.

He kept his 2012 loan growth forecast of 10.5 per cent for the year and maintained a "neutral" call on the banking sector, with his top investment picks being Public Bank Bhd and BIMB Holdings Bhd. 

Source : New Straits Times

Date : 4 May 2012 

Today's Pick (04/05/12/077/771)