Household loan applications rise in July on favourable demand

Lenders register a 5.3% loan growth for July this year, boosted by the rise of vehicle purchases


Loans growth continues to register a solid rise as lending demands for both the household and non-household segments remain favourable, despite the economy’s slower growth for this year.

Lenders registered a 5.3% loan growth for July this year compared to 5% a year ago, boosted by the rise of vehicle purchases, said AmInvestment Bank Bhd.

The investment firm in a research report said the loan applications and approvals in July 2018 remained strong for household loans for passenger car purchases as consumers hurried to take advantage of the tax holiday.

The tax holiday is a three-month tax-free collection period by the government between the implementation of the zero-rated Goods and Services Tax, which began on June 1 this year, and the reintroduction of the Sales and Services Tax five days ago.

Non-household loans grew at a faster rate of 4.3% in July 2018 compared to a growth of 4.1% in the preceding month.

“This has been contributed mainly by the improvement in manufacturing, utilities, wholesale, retail, restaurants and hotels, construction, transport, storage and communications as well as the finance, insurance and business services sectors’ loans on a year-on-year (YoY) basis,” the report said.

Household loan growth rose for the second consecutive month in July 2018 to 6% YoY from 5.8% in June.

“Loans for purchase of securities and personal loans trended higher compared to the previous month, while the outstanding credit card receivables were stable.

“Growth in loans for purchase of residential property remained stable, while that for the purchase of passenger cars improved in line with the increase in vehicle demand taking advantage of the tax holiday.

“Thereafter in September, loans for the purchase of cars are expected to trend downwards,” the report noted. On loan applications, household applications continued to surge, especially for loans to purchase passenger cars.

“July 2018 saw the growth in industry loan applications of 1.7% YoY compared to 13.3% YoY in June 2018. The level of household applications rose, but was offset by lower non-household loan applications in July 2018.

“Growth in non-household applications fell to 14.7% YoY versus 18% YoY in July 2018.

“In contrast, household loan applications continued to expand strongly by 14.9% YoY in July 2018 versus 9.7% YoY in June 2018,” the investment bank said.

As for loan approvals, the research firm said there has been marginal growth in July 2018.

“Growth of industry loan approvals was softer at 0.6% YoY compared to 5.4% YoY in the previous month, underpinned by strong growth in approvals of household loans, while non-household loans contracted with a higher negative growth rate.

“For household loans, approval for loans for purchases of passenger cars remained strong and this trend is likely to continue in August 2018,” the report stated.

Meanwhile, the slower pace of approval for non-household loans was mainly contributed by the softer approvals of loans to the utilities, mining and quarry, as well as to the finance, insurance and business activities segments, by sectors.

AmInvestment Bank said the inflation pressure remained low with the Consumer Price Index in July at 0.9%.

“It was higher than the preceding month’s 0.8% — attributed to the higher inflation in transport and housing, electricity, gas and other fuels,” it said.