Stricter lending
policies set out by the government has mitigated the risk in the banking sector
and shielded Brunei's exposure to "toxic assets and default", which
have hit Western economies hard in the recent years, the Oxford Business Group (OBG)
said.
OBG's The Report: Brunei Darussalam 2011, said however, the short-term
effects of these regulatory restrictions have impeded some aspects of the
banking sector, particularly in retail lending.
"In this respect, 2011 has been a year of slow growth for the
industry, where deposits have been up while the value of outstanding loans
decreased," it said.
The report quoted Pierre Imhof, Chief Executive Officer of the Baiduri
Bank Group, saying that in 2011, parallel to an increase in deposits, there has
been a decline in lending.
"Brunei is a rich country, but corporations are not borrowing at
the moment. On the retail side, 2011 has been the year that the
government-initiated credit squeeze has really been felt by banks. There has
been a huge reduction of activity," he explained.
Figures from the Monetary Authority Brunei Darussalam (AMBD) showed
that the value of outstanding loans in the Sultanate fell from $5.36 billion to
$4.83 billion from September 2010 to September 2011.
However, data from the International Monetary Fund (IMF) country report
for Brunei showed that even as combined loan assets for the sector dipped,
Brunei continues to show strong credentials in risk and stability indicators, due
to the growth in deposits.
Non-performing loans (NPLs) in the country also grew late in 2009 and
early 2010 to reach 10.8 per cent of the total loans in the first quarter of
2010, then receded to 8.5 per cent, back to the percentage seen in 2008 of 8.4
per cent.
"The spike in NPLs was attributed in part to the temporary effects
of increased credit restrictions implemented in January (last year)," the
report stated.
In terms of loan distribution, the Bruneian government and banking
industry have been putting forth "great efforts" to increase the
level of corporate and other small business loans, but personal credit
continues to dominate the sector.
"At the end of 2010, personal loans accounted for a majority of
64.6 per cent of all loans issued with a total value of approximately $3.35
billion, compared to 62.7 per cent ($3.5 billion) in 2009 and 68.7 per cent
($4.08 billion) in 2008," OBG said.
Of the 2010 total, roughly one-third of bank loans distributed were
used for mortgages at $1.23 billion, with the remaining $2.13 billion loaned
out for other personal use.
This was followed by car loans, making up $716 million, or 13.8 per
cent of the total.
On the credit retail lending side, the OBG said that Brunei's combined
credit card debt levels has been "much lower" estimated at $400
million, indicating that the governments strict regulations has shown rapid
results.
Now, almost three years into the regulation, banks are "eagerly
waiting" for personal loans converted from credit card debt to be fully
paid off.
"The clean slate will translate into new opportunities for a fresh
round of consumer loans, credit card, or otherwise," it said, adding that
it will now be regulated under information with the credit bureau.
In terms of new opportunities, banks could also be looking at the
commercial side, where the OBG highlighted the end of Brunei's five-year
National Development Plan (NDP), meaning a new five-year NDP will emerge that
may lead to "a surge in large infrastructural spending projects".
"With the recent resolution of a territorial dispute between
Brunei and Malaysia over two large and potentially attractive hydrocarbon
blocks, it is also expected to attract a number of windfall investments. In
addition to the exploratory and other major upstream outlays, the oil and gas
industry also provides significant spin-off businesses across a number of
sectors," the OBG said.
Brunei Times
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