BNM’s April12 statistics continued to suggest that the local banking system remains conducive.
We are maintaining our OVERWEIGHT call on the sector. We have OUTPERFORM calls
on MAYBANK (TP: RM10.40), PBBANK (TP: RM15.50), RHBCAP (TP: RM9.60), CIMB (TP:
RM8.50), AMMB (TP: RM6.70), AFFIN (TP: RM4.30) and BIMB (TP: RM2.90). AFG (TP:
RM3.70) and HLBANK (TP: RM10.90) are rated as
MARKET PERFORM.
Remained stable. Total loans expanded 12.1% YoY to RM1,030.8b
in April 2012 (in contrast to the +12.2% YoY growth in March 2012). On a YTD
basis, total loans grew 2.7%, or 8.1% on an annualised basis, which is still
below our 11%-13% growth forecast for 2012E. Nonetheless, note that the higher
loans growth rates that we have estimated also include overseas loans
expansion. Without the overseas loans expansion, the domestic loans growth is only estimated to be at the lower
end of the range.
Dragged down by
hire-purchase and credit card. Lending to the consumer sector, which had fueled
the industry growth in 2011, was the drag factor in the YTD 2012 numbers. Loans to households (accounted for 55.2% of
the total loans) grew at a lower rate for the fourth consecutive months at
+11.7% YoY largely due to slower hire-purchase loans growth of +6.47% YoY
(March 2012: +7.07% YoY, 2011: +8.69%) and credit card loans of +6.16% (March
2012: +6.59% YoY) although mortgage loans rose to another record high in April,
up +18.7% YoY. On the other hand, business loans grew encouragingly at 12.5%
YoY, driven by robust growth in working capital loans (+10.2% YoY).
Lending indicators
weakened. There was a 16.9% YoY drop
in loan applications to RM67.4b, with the decrease due mainly to slower
applications in the real estate (RM3.4b) and manufacturing (RM4.1b) sectors.
Furthermore, loan approvals also declined 11.4% YoY.
Deposits rose +13.8%
YoY. The YoY growth in total deposits was due to the +13% increased in
fixed deposits and +14% growth in demand deposits. As deposit growth has
continued to outpace loan growth, the LDR was stable at 76.7%, with total CASA
contributing 25% of the total deposits.
ALR +14bps.
Interest spread improved significantly as the 3M FD costs held steady at 2.97%
but average lending yields improved by 14bps to 4.88%. However, as the banking
system’s loan-odeposit ratio stood lower at 76.7%, this could put further
pressure on banks’ interest margins.
Asset quality stable. Absolute impaired loans were barely changed
at RM26.1b compared with RM26.0b in March 2012. Nevertheless, the impaired loan
ratio was slightly higher at 1.76% (March 2012: 1.74%) and the loan loss
coverage was slightly lower at 91% (March 2012: 92%).
Capital markets. Primary debt issuance was recorded at RM2.25b
in April12 (vis-à-vis RM5.12b in March12).
As for the equity market, its average daily trading value declined to
RM1.43b as opposed to RM1.69b in the previous month.
No change in our view
for now. The recent resumption of
the price war for residential mortgages (BLR minus 2.5-2.55% from BLR minus
2.4-2.45% in 2011) point to lower margins, while the introduction of the
Responsible Finance guidelines could mean a softening in consumer loan growth
with further NIM compression. We believe that our projected industry loan
growth of 11%-13% for 2012E can be achieved with corporate loans likely to grow
in 2H with the start of ETP infrastructure projects. All in all, we believe the
local banking group will continue to do well in the current conducive banking
system. Our top picks are Public Bank (“PBBANK”) (domestic driven model offers
earning visibility) and CIMB Group Holdings (“CIMB”) and Malayan Banking
(“MAYBANK”) (ETP-optimism in banking with a bright prospect on corporate loans
as well as debt securities). We find BIMB Holding Bhd (“BIMB”) as the potential
dark horse (with its niche in Islamic Banking) for the sector.
Source: Kenanga
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