KUALA LUMPUR, Dec 16 — Malaysian banks will continue to grow at a lukewarm rate next year following a disappointing 2016 and slowdown in household loans since 2013, the Financial Times’ group Confidential Research (FTCR) said today.

Its 2016’s fourth quarter report also revealed that slowdown in household income growth has caused consumers to be cautious in buying "big-ticket items” such as property, that would usually require financing from banks.

"Our 1,000 survey respondents complained of sluggish income growth, which is dragging on purchases of big-ticket items that often require bank financing.

"The growth outlook for Malaysian banks remains weak in 2017,” said its report.

FTCR said its Household Income Index for Malaysia dropped 9.2 points from the third quarter to fourth, while the country’s Property Purchase Index — gauging interest in buying property in the next two quarters — also fell 10.5 points in the same period.

Another indicator, its Property Buying Sentiment Index for Malaysia — gauging views whether it is a good time to buy property — also fell by 9.4 points.

However, FTCR pointed out that sliding loan growth is set to recover in the next two quarters albeit at a weak rate, after its Future Consumer Borrowing Index for the country — gauging expected changes in borrowing over the coming two quarters — rose 1.5 points quarter-to-quarter.

FTCR said Malaysian household lending could increase by 5.3 to 5.6 per cent next year, compared to around 5.1 to 5.3 this year.

"While this is positive for banks, the improvement will probably be small. They have already taken a hit from disappointing economic growth this year, with revenue growth among the four largest Malaysian lenders weak in the first three quarters of 2016,” it said.

It also added that local banks CIMB and RHB only improved their net profit through several cost-cutting measures.

The report said household loan growth slowed due to tighter lending requirements imposed by Bank Negara Malaysia (BNM) in 2012, made worse by the Goods and Services Tax implemented in April last year, job losses due to rising oil and gas prices, and sentiments against strategic fund 1 Malaysia Development Bhd.

Citing BNM, it said loan growth has been decelerating since 2013, with year-on-year rate falling from 5.6 per cent in September this year to 5.4 per cent in October.