On a YTD basis, the total loan amount of RM1,079.5m grew
7.6% or 11.4% on an annualised basis, which is in line with our 11%-13% loan growth
forecast for 2012. Despite signs that banks
have been pulling back on consumer lending since 1Q2012, loans to
households (which accounted for 54.9% of the total loan) grew at a steady rate
in August12 at +11.7% YoY largely driven by a healthy recovery in the
hire-purchase loan growth of +7.3% YoY (vs. July12: +7.28%). However, there was
a continuous weakening of the growth momentum in credit card loans of +2.39%
(vs. July12: +3.14% YoY). Mortgage and business loan growth rates, on the other
hand, were steady at +17.5% YoY (vs. July12: 18.0%) and +13.2% YoY (vs. July12:
14.4%), respectively.
The rise of corporate
and business loans? While the “re-balancing” of Malaysian lending portfolio
will likely occur at a measured pace, we do think that this will bring some
changes to the banking industry landscape in the next few years. For instance,
there could be a shift from consumer growth to that of corporate and business
growth. This is because regulatory intervention on consumer lending
requirements has grabbed the headlines on contrast to corporate lending growth,
which should not face any similar direct pressure given the continued growth of
ETP-related projects. In the absence of robust growth in the consumer sub-segments
i.e. mortgages, hire-purchase and credit cards, banks have been supporting the
financing of ETP-related infrastructure projects – this being reflected most
recently in the higher corporate lending growth of 13.2% vs. consumer’s 11.7%.
Monetary policy
remains accommodative. That said, Bank Negara Malaysia (BNM) is taking a
thoughtful approach to its overall lending policy in the system, preferring
selective growth rather than a broad-based tightening which still promotes a
healthy lending practice in the system. We expect loans growth in the consumer
segment to moderate as the recent Responsible Finance rules related to down
payments are still affecting demand. Nonetheless, the overall lending growth
rate should still hit our target of 11-13%. This is because the current
monetary policy and the underlying liquidity condition, with excess liquidity
and capacity in the system (a L/D ratio of 79%), should continue to support
both investment and consumption demand growth.
Margin squeeze is a
new norm? A common trend seen in the monthly statistics is the downside risk
to NIM asserting itself despite the consistent loan growth in the system. Over the
last eight months, we have seen greater competitions for deposit funding in the
household credit segment. If this proves temporary, we see little downside risk
to NIM. However, if this trend is
sustained, the higher funding costs could be a major drag on net interest
income and hence EPS growth. In fact, NIM compression headwind is no stranger
to Malaysian banks. The recent 2Q results have shown the consistent disappointment
in this area from funding/lending competition.
Asset quality in the
system remains strong. We think that ultimately lower NPLs will be mask by
the strong lending quality and robust loan
growth. This has led to the NPL ratio falling 35bps in the past year to
1.48%. There is also continuing more benign outlook for credit costs. On balance, we continue to remain optimistic
on the sector outlook. We are maintaining our OVERWEIGHT call on the sector. We
have OUTPERFORM calls on MAYBANK (TP: RM10.40), PBBANK (TP: RM15.60), RHBCAP
(TP: RM8.30), CIMB (TP: RM8.20), AMMB (TP: RM7.40), AFFIN (TP: RM4.30) and BIMB
(TP: RM3.60). AFG (TP: RM4.00) and HLBANK (TP: RM13.00) are both rated on MARKET PERFORM calls.
Source: Kenanga
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