Govt housing loan transfer of estimated RM42bil seen to boost commercial lenders' growth

PETALING JAYA: A move to restructure the Government’s housing loan division will shave the fiscal debt and possibly raise housing loan growth by commercial banks.

Analysts are expecting the Government to transfer RM42bil worth of civil servant housing loans into the banking system whereby staff will pay the normal 4% per annum and the Government subsidise any interest above that threshold.

All commercial banks are also expected to be eligible to participate in providing housing loans for government servants and analysts expect the transfer of loans to commercial banks and development financial institutions will lower total federal government debt by around 4% to 4.5% from 51.8% of GDP as of June 30, 2013.

The idea to restructure the Government’s housing loan division was first mentioned in last year’s Budget as part of efforts to consolidate the fiscal deficit and to ease the Government’s financial burden. During the budget speech it was mentioned that the Government would appoint panels from commercial banks to manage new housing loans effective January 2013. But this had yet to implemented, said a local research house.

The research house reckoned the staff housing loans would be transferred to government-owned development financial institutions such as Bank Rakyat, Bank Simpanan Nasional, Agro Bank and Bank Pembangunan, which will manage and administer the existing stock and future stream of civil service home loans.

Another a local bank-backed brokerage analyst said whether it made sense or not for banks to be allowed to handle government staff housing loans would much depend on the profitability of such loans.

“Banks should take into account whether in the long term it is profitable to do so after weighing in various factors such as its capital consideration and interest rate environment, among others,’’ he told StarBiz.

He said the treasury housing loans charged a flat rate of 4% (compared with between 4.2% and 4.3% for new home loans by commercial banks) and all would depend whether it would profit banks after taking into consideration the above factors over the long term.

An industry observer said the move could uplift loan growth in the banking system, coupled with other positive factors, if some of the RM42bil were to be transferred to commercial banks.

Another bank-backed analyst said the transfer could be positive for the banking system as the recent measures to shorten the tenure for mortgage and personal loans as well as the potential fiscal tightening by the Federal Government via subsidy rationalisation programme in the later part of the year could dampen loan growth momentum in the retail segments.

This move to transfer could to an extent boost loan growth in the banking system moving forward. Total banking system loan growth to date stands at RM1.17 trillion. Some analysts are, however, maintaining their loan growth projections this year.

On a year-to-date annualised basis, the banking system’s outstanding loans growth was relatively flattish at 9.8% in August. Property loans remained the key driver, where loans for the purchase of residential and non-residential properties accounted for 56% of credit growth.

This is followed by working capital and hire purchase loans, contributing 15.2% and 11% of credit growth, respectively.

Lending indicators for August gained momentum year-on-year but fell on a month-on-month basis.
Loan applications, approvals and disbursements dropped by 9.9%, 8.1% and 2.4% month-on-month to RM67.5bil (July 2013: RM75bil), RM33.5bil (July 2013: RM36.5bil) and RM80.1bil (July 2013: RM82.1bil), respectively. - The Star