Sluggish approval rates dampen loan growth in Malaysia

Loan approvals on a 3M MA basis fell from 12.6% to 5% in March.

Although industry loan expansion clocked in at a healthy 4.4% YoY in March thanks to sustained demand for household loans, sluggish approval rates are set to bring about a slower pace of growth for Malaysian banks in the near future, according to Maybank Kim Eng.

Loan approvals contracted 7.6% YoY in March which contributed to a slowdown in loan approval growth on a 3M MA basis from 12.6% YoY in February to 5% in March.

Loan applications were flat YoY, having contracted 5.8% YoY in Feburary. On a 3-month moving average (3M MA) basis, loan applications expanded at a faster pace of 6.6% versus 5.8% YoY in February.

Auto loan applications also fell for the sixth consecutive month at -5% YoY whilst mortgage applications contracted for the first time in 18 months (-1.2% YoY). Similarly, commercial property loan applications continued to rise, but the average approval rate dropped to just 29% in March. Meanwhile working capital loan applications and approvals both contracted on a 3M MA basis over the same period.

Here's more from Maybank Kim Eng:

Having expanded at a double-digit pace over the past 12 consecutive months, mortgage applications growth slowed to 5.8% on a 3M MA basis in Feb 2018, and contracted 1.2% in Mar 2018. Mortgage approvals growth, meanwhile, slowed to 4.4% YoY in Mar 2018, after having risen at a double-digit rate for the past 12 consecutive months. As a result, the average approval rate for mortgages declined to 43% in Mar 2018 from 45% in Feb 2018.

On a 3M MA basis, non-residential property loan applications remained strong, expanding 21.0% YoY in Mar 2018 versus 20.6% YoY in Feb 2018. 3M MA approvals expanded 10.3% YoY after having contracted over the past four consecutive months. Nevertheless the average loan approval rate dropped to a low of 29% in Mar 2018 from 34% in Feb 2018.

Auto loan applications (3M MA basis) contracted yet again for the sixth consecutive month (-5.0% YoY versus -5.4% YoY in Feb 2018), as car sales continued to be sluggish. Loan approvals (3M MA) rose at a marginal pace of 1.8% and as such, the average approval rate was stable at 56% in Mar 2018.

Personal loan applications continued to expand at a rapid 3M MA pace of 24.5% YoY (26% YoY in Feb 2018), the fifth consecutive month of a double-digit expansion rate. Personal loan approvals were also up a robust 29.7% YoY, though the overall approval rate remained low at just 28%.