Banking Sector - Healthy impact from Responsible Lending Guideline Overweight

- Some impact seen from the new Responsible Lending Guideline. The new Responsible Lending Guidelines had had some impact on the industry generally. There appears to be some slowdown in consumer loan applications and approvals for even up to latest weeks of March 2012.  

- Affin believes the impact is marginal and likely limited to loan applications and approvals outside of Klang Valley. Affin alluded at its Analysts’ Briefing on 16 March that it has not been affected that much by the new responsible lending guideline as it is already quite stringent in terms of its internal scorecard for autos and mortgage. The company believed thatany impact seen is marginal and is probably in relation to auto and mortgage approvals outside of the Klang Valley.  

- AFG hinted first two months were relatively slower. At our company visit to AFG on 15 March, the company hinted that loan applications and approvals were slow in January to February, with declines of about 20% MoM compared to earlier months. The company guesstimated that perhaps 10% to 20% of the industry’s loan approvals and applications were affected by the new Responsible Lending Guideline. On its side, it believed that it is affected more by the shorter working period as Chinese New Year was particularly early on 23 January this year. 

- Maybank was pleasantly surprised that February is back to normal. Maybank alluded that the first initial few months of the year is considered to be historically slow based on its track record, as these included several festive holidays. Whilst loans approvals and applications had seen moderation similar to the industry’s in January 2012, the company said that it was pleasantly surprised that February 2012’s trend is now back to normal. It has not seen much impact from the new Responsible Lending Guideline.

- PBB sees stable trend if measured on average working day basis. PBB believed loan applications and approvals were affected in January and February 2012 due partly to shorter working period, which affected the time for delivery of auto bookings. However, PBB indicated that its February 2012 leading loan indicators is stable if measured on an average per working day basis, as the month also included several holidays. 

- Maintain overweight. We have already modelled in overall loans growth of 6% for 2012 (industry loan growth: 13.6%  2011), thus we are not changing our forecasts based on the latest feedback from our meetings. On the flip side, the banks have indicated that there is a healthy pipeline in terms of corporate loans, with up to 50% of the loans approved being largely related to the government’s Economic Transformation Programme. We maintain overweight on the sector.

Source: AmeSecurities