The domestic banking system continued to see resilient business credit demand in July, with total loan growth edging up to 5.6% year-on-year from 5.5% in June, even as signs of moderation emerged in household borrowing and deposits.
According to the report, business lending accelerated to 7.5% year-on-year from 7.3%, supported particularly by financing to the manufacturing, retail trade, and finance, insurance and real estate sectors.
Household loan growth, meanwhile, remained steady at 5.0%, underpinned by demand for passenger vehicle financing, residential property loans and personal financing.
Leading loan indicators presented a mixed picture. Loan approvals strengthened to 24.7% year-on-year from 22.8% in June, while disbursement growth accelerated to 7.6% from 7.0%.
Loan applications, however, slowed sharply to 17.1% from 27.0%, suggesting some moderation in prospective credit demand.
The slowdown was particularly evident among households, where loan applications grew just 1.7% compared with 12.5% in June. Applications weakened across passenger cars, residential property and personal uses.
Business loan applications remained much stronger at 37.7%, although this was also slower than June’s 45.9% growth.
Despite weaker applications, business loan approvals surged 51.9% year-on-year, accelerating from 35.3% in June. Household loan approvals, in contrast, contracted 2.6% after growing 8.6% previously.
Deposit growth moderated to 5.6% year-on-year from 6.0% in June, reflecting slower growth in both business and household deposits.
Business deposits expanded 7.2%, easing from 7.5%, while household deposit growth slowed to just 1.3% from 1.7%. Foreign deposits bucked the trend, accelerating to 7.4% from 6.4%.
The divergence between household borrowing and savings also became more pronounced.
On a month-on-month basis, household loans increased 0.5%, accelerating from 0.3% in June, while household deposits contracted 0.4% after expanding 0.2% in the preceding month.
On a year-on-year basis, household loans continued to grow at 5.0% compared with deposit growth of only 1.3%, widening the household loan-deposit gap.
Monetary indicators similarly moderated during the month. Narrow money supply, or M1, grew 8.2% year-on-year, down from 8.9% in June following slower demand deposit growth.
Broad money supply, or M3, eased to 5.7% from 6.7%, while reserve money growth accelerated to 8.6% from 7.1%.
Corporate bond activity strengthened significantly, with gross issuance climbing to RM20.5 billion from RM9.8 billion in June. The increase was driven by higher issuance from finance, insurance, real estate and business services, construction, and government and other services.
Foreign investors turned net sellers of Malaysian bonds in July, recording net outflows of RM6.4 billion, reversing June’s RM4.1 billion net inflow.
The report attributed the reversal partly to renewed geopolitical tensions following the collapse of the US-Iran ceasefire and increasing expectations that the US Federal Reserve could raise interest rates.
Malaysian equities, however, recorded a modest RM300 million foreign net inflow, reversing the RM2.4 billion outflow recorded in June.
The research house said July’s banking indicators suggest that while household activity is showing signs of cooling, credit demand among businesses remains intact.
It expects Malaysia’s economy to continue receiving support from ongoing business activity alongside stable household consumption and maintained its 2026 GDP growth forecast at 5.3%.
