Outstanding loans of universal and commercial banks rose 7.2% year-on-year (YoY) in August. Although there was growth nominally, the growth was a slight decline from the 7.7% seen in July. Growth in loans for production activities slowed to 5.5% in August, down from 6.2% in the previous month.<\/p>\n\n\n\n
Lending to key industries like real estate (5.7%) and electricity, gas, and air conditioning (9.0%) continued to expand. Wholesale and retail trade, repair of motor vehicles (7.1%), information and communication (10.7%), and financial activities (6.1%) also saw growth. <\/p>\n\n\n\n
Consumer loans to residents remained steady at 22.7% in August, up from 22.6% in July. The steady consumer loan growth was driven by credit card and motor vehicle loans. Outstanding loans to non-residents increased by 7.8% in August. Meanwhile, domestic liquidity (M3) grew by 6.8% YoY in August, reaching \u20b116.5 trillion. On a month-on-month basis, M3 increased by 1.6%.<\/p>\n\n\n\n
Our View: <\/strong>The banking sector remains resilient, benefiting from a diverse array of sectors that contribute to its growth. However, there are indications that the ongoing trend of decelerating growth may persist. <\/p>\n\n\n\n The delayed repercussions of higher interest rates are starting to impact loan demand, which could ultimately result in reduced interest income and lending fees for banks. Consequently, banking stocks may have reached a near term peak and underperform under such conditions. <\/p>\n\n\n\n The sustained slowdown in loan demand carries significant implications, extending beyond the performance of banking stocks. It serves as a leading indicator of broader economic activities, highlighting the interconnectedness between the financial sector and the overall economic well-being. This slowdown suggests that businesses are becoming more cautious about expanding and investing in their operations. Simultaneously, consumers may eventually become hesitant to take on additional debt, a shift that could trigger a ripple effect across various sectors of the economy.<\/p>\n\n\n\n