Malaysian banks' loan growth expected to moderate to 4.7% in 2017

Household debt/GDP is down for the first time in 7 years.

According to Maybank Kim Eng, the one major positive from BNM’s 2016 Financial Stability and Payment Systems Report is that household (HH) debt/GDP slipped for the first time since 2010, testimony to the success of the central bank’s macro prudential policies.

It is nevertheless because of this slowdown in credit creation that we expect industry loan growth to moderate further to 4.7% in 2017 from 5.3% in 2016 given that the rate of loan applications/approvals continued to contract throughout much of last year.

"The positive takeaway on the consumer front is that HH debt expanded at a more moderate pace of 5.4% in 2016 (7.3% in 2015) and Malaysia’s HH debt/GDP slipped for the first time since 2010 to 88.4% end-2016 from 89.1% end-2015. Also positive is that HH debt expansion kept pace with growth in financial assets for the first time since 2012 - HH financial assets and liquid financial assets to total debt remained comfortable, at 2.1x and 1.4x respectively," said Maybank Kim Eng.