KUALA LUMPUR, Jan 3 (Bernama) -- Malaysia’s banking loan growth is projected at 6.0 per cent in 2025 amid uncertainties in foreign trade policies, said Kenanga Investment Bank Bhd (Kenanga IB).
The investment bank said the expectation is close to its 5.5 per cent to 6.0 per cent target for 2024 on a loan-to-gross domestic product (GDP) multiplier of 1.2 times (10-year average).
Currently, the bank is eyeing a slightly slower landing of 4.8 per cent gross domestic product (GDP) in 2025 from shortfalls in the construction space led by drags in the Mass Rapid Transit 3 (MRT3) project.
"Households will remain supportive with mortgage demand led by new property launches in the Klang Valley and Penang, although with flattish expectations from hire purchase following the automotive industry’s stellar total industry volume delivery of 800,000 cars in the last two years.
"Meanwhile, business loans are sustained by service sectors in the wholesale, retail and hospitality industries," it said in a research note today.
The manufacturing scene is also expected to be fuelled by working capital and expansion-based loans with the domestic electrical and electronics industries at the forefront, helped by good foreign direct investment (FDI).
Kenanga IB also expects the sector to see fewer negative surprises to fundamentals with previously distortive provisions and writebacks from pandemic overlays out of the picture.
However, positive turns hinge on clarity on the Johor-Singapore’s Special Economic Zone to bolster domestic industries and FDI injections there that are also spilling over to residential developments.
On net interest margin (NIM), Kenanga IB said banks may continue to see NIM reversion and would have a better position to recalibrate their profit spreads to revitalise NIMs in 2025.
"From the third quarter of 2024's reporting, most banks were able to expand on their NIMs following better liability management initiatives, including the rationalisation of deposit rates and foreign exchange swaps.
"While the fourth quarter of 2024 is expected to be compressive of the back of year-end seasonal fixed deposit rate competition, we believe that 2024 may see a lesser drag given that the industry liquidity coverage ratio remains highly sufficient at 147 per cent as of October 2024," it said.
On the overnight policy rate (OPR), the investment bank expects the rate to remain stable at 3.0 per cent.
-- BERNAMA
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