KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Fri, 17 May 2019, 10:15 AM


BNM Apr Stats: Highest Loan Growth Since Sept17

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Macquarie Equities Research (MQ Research) summarised Bank Negara Malaysia’s (BNM) April 2018 banking data in its report released yesterday. April’s loan growth accelerated to 4.8% year-on-year (YoY), the highest since Sept 2017, as loan applications and approvals were resilient.

MQ Research is overweight on banks, and is of the view that banks with regional platforms have the greatest potential for outperformance, with CIMB and RHB Bank as its top picks.


  • April system loan growth rose to 4.8% YoY (March: 4.4%), highest since Sept 2017, while system loan applications and approvals were resilient. Mortgage growth was resilient, at 8.9% YoY (March: 9.0%), while ALR continued to rise post-overnight policy rate (OPR) hike in Jan, supportive of net income margin (NIM) traction (note broad NIM gains in 1Q18 bank reporting). System NPL remain near record-low. Per 1Q results, banks with regional platforms (ie Maybank, CIMB, RHB Bank) have the greatest potential for outperformance re loan growth, which significantly outperformed Malaysia-centric peers, and net credit cost moderation (MFRS 9 adoption has been relatively seamless).


  • Household lending grew a slightly faster 5.7% YoY (March: 5.6%), continuing its recovery after a steady declining trend since 2010. Year-to-date (YTD) mortgage lending at 8.9% is double that of broad sector (4.5%). Business lending also perked up, to 3.6% (March: 2.9%), with working capital growing 1.3% (March: 0.3%, weakest since 2009) – banks indicate healthy corporate pipelines but execution may be diluted by new government policy uncertainty/changes.
  • System deposits growth accelerated further, to 5.6% YoY (March: 4.2%), its strongest since mid-2015; improved system liquidity (1Q18 aggregate Ringgit surplus liquidity placed with BNM is an ample RM199bn) has moderating effect on deposit rates even as ALR trends higher (ALR has risen 29bps YTD vs fixed deposit rates at c.22bps) and current account, savings account (CASA) share of deposits having risen significantly (at 26.8% vs. record 27.8%) – net effect should be a continued (per 1Q18 reporting) albeit moderating uptrend for sector NIM.
  • Gross NPLs rose slightly, to RM25.5bn (March: RM25.2bn), with NPL ratio up 1bps, to 1.57% (vs Dec record low of 1.53%). System coverage ratio (95%) and CET 1 ratio (12; 12.9% post-dividends/MFRS 9) remain healthy.


  • MQ Research is overweight on banks for broadly improved fundamentals – while loan growth remains challenging, earnings momentum is supported by rising NIM, opex containment and falling credit costs. MQ Research’s absolute upside picks are CIMB, 1Q18 mid-cap outperformers RHB Bank and Hong Leong Bank. Selling pressure on Maybank re Hyflux credit exposure appears overdone and is an opportunity to accumulate, especially for those wanting to be defensively positioned re the government’s 100-day transition. Public Bank has similar tactical low-beta defensive attraction, though longer-term, investors should switch out given structurally crimped growth prospects vis-à-vis Asia-topping valuations.

Source: Macquarie Research - 5 Jun 2018

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