Banking sector
Maintain overweight: Growth momentum in loan applications and loan approvals moderated in December 2011, declining by 2.1% and 3.4% on a month-on-month (m-o-m) basis to RM63.4 billion (November 2011: RM64.8 billion), RM34.7 billion (November: RM35.9 billion), respectively. We believe the m-o-m moderation in loan applications and loan approvals to be reasonable in view of the shorter working period due to the year-end holidays and festive seasons. On the other hand, loan disbursements surged by 18% m-o-m to RM83.7 billion (November: RM71 billion), indicating continued vibrant lending activities. Supported by strong loan disbursement, outstanding loans for 2011 grew by 13.6% year-on-year (y-o-y) (November: 13%).
Property loans remain the key growth driver, accounting for 41.8% of the year-to-date (YTD) credit expansion, followed by working capital loans (22%). Property loans, the major loan growth driver last year, peaked in 2011, and we expect the increased business loans stemming from the rollout of Entry Point Projects (EPP) under the government’s Economic Transformation Programme (ETP) and the recovery in hire purchase loans to pick up the slack caused by the anticipated moderation in property loans.
Both loan-deposit ratio (LDR) and financial-deposit ratio reduced marginally at 80.9% (November: 81.7%) and 86.7% in December (November: 87.7%).
Deposits rose by 3.1% m-o-m (November: 1.7%). Full-year deposit growth rate improved to 14%, compared with an annualised YTD growth rate of 11.5% in November.
The average base lending rate of the commercial banks remained flattish m-o-m at 6.54%. The average lending rate (ALR) three-month fixed deposit (FD) spread moderated marginally to 2.06% (November: 2.07%). The stagnant ALR three-month FD spread, which serves as a proxy for the sector net interest margin (NIM), has reaffirmed our expectation that NIMs have hit bottom last year and should stabilise or even improve in 2012.
Despite the persistent global uncertainties in the second half of 2011, asset quality for the banks in December improved marginally m-o-m with impaired loan ratio for December lowered at 1.8% (1.9%) and loan loss coverage increased to 99.6% (November: 96.3%). The banking system remained well-capitalised, with the risk-weighted capital ratio and core capital ratio at 14.9% and 12.9% respectively. This implies the domestic banking system is resilient to withstand unanticipated shocks to the financial system, if any. The latest banking statistics have reaffirmed our conviction that the underlying fundamentals of the domestic banking sector remain solid. — Alliance Research, Feb 2
This article appeared in The Edge Financial Daily, February 3, 2012.
Maintain overweight: Growth momentum in loan applications and loan approvals moderated in December 2011, declining by 2.1% and 3.4% on a month-on-month (m-o-m) basis to RM63.4 billion (November 2011: RM64.8 billion), RM34.7 billion (November: RM35.9 billion), respectively. We believe the m-o-m moderation in loan applications and loan approvals to be reasonable in view of the shorter working period due to the year-end holidays and festive seasons. On the other hand, loan disbursements surged by 18% m-o-m to RM83.7 billion (November: RM71 billion), indicating continued vibrant lending activities. Supported by strong loan disbursement, outstanding loans for 2011 grew by 13.6% year-on-year (y-o-y) (November: 13%).
Property loans remain the key growth driver, accounting for 41.8% of the year-to-date (YTD) credit expansion, followed by working capital loans (22%). Property loans, the major loan growth driver last year, peaked in 2011, and we expect the increased business loans stemming from the rollout of Entry Point Projects (EPP) under the government’s Economic Transformation Programme (ETP) and the recovery in hire purchase loans to pick up the slack caused by the anticipated moderation in property loans.
Both loan-deposit ratio (LDR) and financial-deposit ratio reduced marginally at 80.9% (November: 81.7%) and 86.7% in December (November: 87.7%).
Deposits rose by 3.1% m-o-m (November: 1.7%). Full-year deposit growth rate improved to 14%, compared with an annualised YTD growth rate of 11.5% in November.
The average base lending rate of the commercial banks remained flattish m-o-m at 6.54%. The average lending rate (ALR) three-month fixed deposit (FD) spread moderated marginally to 2.06% (November: 2.07%). The stagnant ALR three-month FD spread, which serves as a proxy for the sector net interest margin (NIM), has reaffirmed our expectation that NIMs have hit bottom last year and should stabilise or even improve in 2012.
Despite the persistent global uncertainties in the second half of 2011, asset quality for the banks in December improved marginally m-o-m with impaired loan ratio for December lowered at 1.8% (1.9%) and loan loss coverage increased to 99.6% (November: 96.3%). The banking system remained well-capitalised, with the risk-weighted capital ratio and core capital ratio at 14.9% and 12.9% respectively. This implies the domestic banking system is resilient to withstand unanticipated shocks to the financial system, if any. The latest banking statistics have reaffirmed our conviction that the underlying fundamentals of the domestic banking sector remain solid. — Alliance Research, Feb 2
This article appeared in The Edge Financial Daily, February 3, 2012.
