Published October 6, 2009

EON sees loans growing 5-6% on low interest rates

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(KUALA LUMPUR) Malaysia's EON Bank expects its loan book to expand by 5-6 per cent this year even as the economy is shrinking as low interest rates drive up demand for consumer loans, especially mortgages, said a top executive.

'It has been pretty good for the group bearing in mind the economy had not been so favourable,' said Michael Lor, head of consumer banking at EON Bank Group, which is a unit of EON Capital Bhd.

'For the consumer side of the business, we are humming along pretty well since January and we will probably end the year at around 9-10 per cent of growth,' he said in an interview.

Corporate lending remains sluggish and the bank, which has a market capitalisation of about US$1.1 billion, plans to speed up this year the provisions for some of its corporate loan accounts in the Middle East, said Mr Lor.

'We are in the progress of doing it. We have two Middle East loans that we are accelerating our provision,' he said. 'We think that when our earnings and revenue remain strong, we then have the ability to expedite the provision.'

Mr Lor declined to disclose the amount of the loans involved, saying that he could not discuss the details because they are currently being restructured.

He executive said that he expects the outlook for the banking industry to further improve in 2010 as the economy recovers but the fourth quarter of this year will be tough as consumers tend to overspend and delay loan payments during the festive months.

'The fourth quarter is usually seasonally weaker, growth will slow down a little bit and delinquencies will come up a little bit as people defer payments,' he said.

EON Bank has a high exposure to the consumer loan market with car financing and residential mortgages making up for more than half of its total loan book.

Rating agency Fitch Ratings said that the impact of new delinquencies will remain an earnings risk for EON Bank in the second half of 2009 and 2010 as the unemployment rate climbs. -- Reuters