This article first appeared in The Edge Financial Daily on March 1, 2018 - March 7, 2018

KUALA LUMPUR: Most banks are setting moderate loan growth targets for this year as they remain cautious after falling short of their growth targets for the financial year ended Dec 31, 2017 (FY17).

Malayan Banking Bhd (Maybank), the country’s largest lender by assets, is targeting a loan growth of 4% for FY18, similar to that achieved last year, after failing to meet the 6% target in FY17.

Maybank group president and chief executive officer (CEO) Datuk Abdul Farid Alias believes the shortfall in FY17 loan growth was due to the corporates preferring to raise funds from the bond market than the loan market due to lower rates.

He expects this year’s loan growth to be supported by a pickup in corporate lending and stable consumer lending.

“The consumer side is going to be okay. On the corporate side, it’s going to be robust. It (lending to the corporate sector) will probably expand by about 8% [in FY18],” Abdul Farid told a press conference to announce the group’s financial results for FY17 yesterday.

“We might be surprised by an upside [in loan growth this year], but we just want to be cautious,” he added.

Maybank’s Malaysian operations recorded a loan growth of 5% for FY17, outpacing domestic industry growth, while its Singaporen and Indonesian operations recorded increases of 4.3% and 3.6% respectively. At the group level, gross loans on a reported basis grew 1.7% year-on-year (y-o-y). However, after normalising for foreign exchange (forex) impact, group loans expanded at 4% y-o-y.

Slower-than-expected loan growth from its Singaporean and Thai operations saw CIMB Group Holdings Bhd miss its overall loan growth target for FY17. The group recorded a growth of 0.2% compared with a target of 7%.

Group CEO Tengku Datuk Seri Zafrul Aziz said loan growth in its Malaysia operations was, however, above the industry average.

“[Our] Malaysian loan growth was actually 6.5% last year while industry loan growth was only around 5%. So, in Malaysia we grew above the industry average,” he told a media briefing to announce the group’s FY17 results yesterday.

The country’s second-largest lender by assets registered an overall loan growth of 8.7% in FY16.

CIMB, nevertheless, met other FY17 targets with a return on equity (ROE) of 9.6% against the targeted 9.5%. Common equity tier 1 (CET1) ratio strengthened to 12.2%, meeting the target of at least 11.5%. Cost-to-income ratio (CIR) came in at 51.8%, also meeting the target of below 53%.

For FY18, Zafrul said CIMB is targeting a higher ROE of 10.5%, the same dividend payout range, a loan growth of 6%, loan loss charge of between 0.55% and 0.6%, CET1 ratio of 12%, and CIR of 50%.

On Feb 22, Public Bank Bhd announced a tepid loan growth of 3.6% for FY17, which it attributed to the lending growth in its retail consumer and commercial banking segments. For FY18, management guides for slightly faster loan growth of 5%.

RHB Bank Bhd achieved all of its FY17 key performance indicator targets except for ROE, loan growth and its target for overseas profit contribution. RHB Bank missed its loan growth target of 5% for FY17, hitting 3.7%. Nevertheless, it has set a loan growth target of 6% for FY18.

On Monday, Hong Leong Bank Bhd cut its loan growth target for FY18 to between 3% and 4% from an initial forecast of 5%-6% as industry credit growth remains subdued and the group continues to be selective of its borrowers.

Its loan growth expanded 1.8% y-o-y for the cumulative six months ended Dec 31, 2017 on the back of moderate industry credit growth, as well as still cautious business sentiments.

Yesterday, AMMB Holdings Bhd reported that its loan growth came in at 4.1% y-o-y for the cumulative nine months ended Dec 31, 2017 to RM94.7 billion, with mortgages growing 15.2% y-o-y and small and medium enterprise loan growth at 12.4% y-o-y.

“For 2018, we project loans to grow about 5% in line with gross domestic product growth of 5.5% in 2018,” said its CEO Datuk Sulaiman Mohd Tahir in a statement.

Alliance Bank Malaysia Bhd, on the other hand, saw its gross loans contract by 0.5% y-o-y for the cumulative nine months ended Dec 31, 2017. It has set a full-year FY18 target of 4% (business as usual and transformation initiatives).