Banking Sector - Banking Sector : Muted end to 2012

-  Leading indicators remained muted in December. Loans applications continued to contract, by 14.6% in December 2012 following a drop of 19.0% in November 2012. Loans approved plunged 21.1% in December 2012 (November: -4.1%), signalling seven consecutive months of decline. 

-  Contributed partly by a soft corporate segment.  The slower December data was again contributed by the corporate segment. The corporate segment loans applied decreased 38% in December (November: 48.9%). Corporate loans approved decreased at a larger rate of 45.0% in December compared with 23.5% in November. This was likely contributed by the seasonal year-end holidays.

-  Auto loans remains as one unexpected bright spot.  Auto loans were again surprisingly resilient, recording an applications growth of 10.9% in December (November: 13.3%). Auto loans approved was also surprisingly quite strong with a growth of 14.8% in December (November: 3.9%). This was likely due to year-end promotions by Perodua. 

-  Industry loans growth moderated significantly to 10.4% in December, from 11.2% in November. The slower growth came largely from the corporate loans (34.7% of total loans) segment, with a significantly slower growth of 6.1% in December, vs. 8.2% in November. The slowdown is not surprising given the soft leading indicators for the corporate segment over the past few months. Retail loans (65.3% of total loans) growth was still resilient at 12.8% in December, unchanged from November’s 12.8%. 

-  Gross impaired loans improve on MoM basis.  Gross impaired loans registered a MoM improvement with a reduction of RM759.1mil or 3.3% in December. This contrast to November’s marginal rise of 0.5% MoM or RM108mil. The only segment recording an uptick in December was the purchase of securities segment, whereas in November, there were MoM increases in the transport vehicles, personal use, construction, working capital and other purposes segments. Gross impaired loans ratio has now improved, to 2.0% in December from 2.1% in November.

  

-  Maintain overweight.  December 2012’s banking statistics indicated that the leading loan indicators remained soft, contributed largely by continuous declines in the corporate segment and a largely muted household segment.  Our buys are AFG, CIMB, PBB and RHB Cap.  Our  top picks are AFG, CIMB and RHB Cap.   

Source: AmeSecurities