Which Malaysian bank will benefit the most from slowing household loan growth?

Total outstanding household loans grew at a slower rate of 5% in 2016.

On 31 January 2017, Bank Negara Malaysia released banking system data that revealed a further decline in household loan growth in 2016 from a year ago. This development is credit positive for Malaysian banks’ asset quality, says Moody's, because it points to slower debt accumulation among households.

Here's more from Moody's:

Among the Malaysian banks rated by Moody’s, Public Bank Berhad and Hong Leong Bank Berhad — the banks with the largest exposure to the household sector — will benefit the most from further improvements in the leverage profile of households.

At end-2016, total outstanding household loans — making up 57% of total banking system loans — grew 5% from a year ago, slower than the 8% growth recorded in 2015 and 10% in 2014.

In addition, the data showed an improvement in the quality of new household lending. In 2016, the growth in household loans was driven by safer housing loans — specifically, loans supported by property collateral — and which exhibited low delinquency ratios, while the growth in riskier unsecured loans remained weak. Meanwhile, the decline in auto loan growth also reflects the households’ increasing cautiousness towards discretionary spending.

The overall household impaired loan ratio remained stable at 1.1% at end-2016, unchanged from the level at end-2015.