Investment Highlights

• Industry loan growth increased marginally to 5.8% YoY in Feb 2024 vs. 5.7% YoY in Jan 2024, contributed by a stronger growth in non-household loans. Working capital loans continued to gain traction. Meanwhile, growth in household loans was stable at 6.2% YoY. YTD loans grew by 4.2% annualised, in line with our loan growth expectation of 4%-5% for 2024. Household loan expansion continued to be supported by stable mortgage growth while loans for purchase of passenger cars picked up pace in Feb 2024. In contrast, growth in personal loans and outstanding credit card balances slowed down. Meanwhile, growth in non-household loans climbed to 5.3% YoY in Feb 2024 vs. 5.1% YoY in Jan 2024. The improvement was driven mainly by stronger pace of financing to the mining, manufacturing, wholesale, restaurants, hotels, real estate, financing, insurance, business services, construction, transportation, storage and communication sectors.

• Slowdown in growth of loan applications and approvals in Feb 2024. Feb 2024 saw a slower growth in applications and approvals for both household and non-household loans.

• Deposit growth moderated with a slower pace in CASA. Deposit growth slipped to 4% YoY in Feb 2024 from 5.2% YoY in Jan 2024. LD ratio for the sector was sustained at 86%. The sector’s loan-to-fund ratio/loan-to-fund and equity ratio was stable at 81.8%/71.3%. Sector LCR fell to 154% in Feb 2024 from 160% in Jan 2024 due to lower LCRs of commercial and investment banks which offset the higher ratio of Islamic banks. CASA growth moderated to 4.6% YoY in Feb 2024 after picking up pace for 4 consecutive months. The banking system’s CASA ratio stood at 29.8% as at end Feb 2024.

• Marginal increase in impaired loans and provisions in Feb 2024. The industry’s GIL/NIL remained stable at 1.6%/1.1%. Total provisions for the sector increased marginally by 0.1% MoM or RM40mil in Feb 2024. The sector’s loan loss cover (LLC) slipped to 92.4% in Feb 2024 (Jan 2024: 93%), attributed to higher impaired loans. Including regulatory reserves, LLC was stable at 120% (Jan 2024: 120.8%).

• The sector's CET1/Tier 1/Total capital ratios declined slightly to 14.6%/15.1%/18.2%.

• Maintain NEUTRAL on the sector with BUYs on CIMB (FV: RM7.10/share), Hong Leong Bank (FV: RM24.10/share), RHB Bank (FV: RM6.60/share) and ABMB (FV: RM4.10/share).

Source: AmInvest Research - 1 Apr 2024