Investment Highlights

• Industry loan growth picked up pace to 4.9% YoY in Nov 2023 from 4% YoY in Oct 2023, contributed by stronger expansion in working capital loans while household loans was stable. Household loan growth was sustained at 5.8% YoY in Nov 2023, supported by loans for purchase of residential property and passenger vehicles. Meanwhile, growth in non-household loans climbed to 3.5% YoY in Nov 2023 compared to 1.5% YoY in Oct 2023, driven by stronger pace in financing to most segments except agriculture, education, health and other sectors. Year-to-date (YTD), loans grew by 4.5% in line with our expected expansion of 4%-5% for 2023F.

• Loan applications and approvals slowed down in Nov 2023. In Nov 2023, growth of both household and non-household loan applications and approvals were slower compared to the preceding month.

• In tandem with the stronger loan expansion, deposit growth accelerated with CASA increasing marginally for the 2nd consecutive month. Deposit grew 5.3% YoY in Nov 2023 vs. 4.3% YoY in Oct 2023 and LD ratio for the sector inched higher to 85.9%. The sector’s loan-to-fund ratio/loan-to-fund and equity ratio rose marginally to 82.5%/72%. Sector LCR declined slightly to 150% in Nov 2023 from 151% in Oct 2023. CASA growth continued to pick up pace for the 2nd consecutive month to register a modest growth of 1.2% YoY in Nov 2023. This led to an inch up in the banking system’s CASA ratio to 29.4% vs. 29.3% in Oct 2023.

• Lower impaired loans but provisions increased in Nov 2023. The industry’s GIL/NIL ratio was steady at 1.7%/1%. The sector’s loan loss cover (LLC) improved marginally to 92.9% in Nov 2023 (Oct 2023: 91.3%), attributed to an increase in provisions and lower impaired loans. Including regulatory reserves, LLC was 119.7%.

• Funds raised by private sector were lower in Nov 2023 due to a decrease in net issuance of bonds and sukuks.

• The sector's CET1/Tier 1/Total capital ratios remained steady at 14.5%/15%/18.1%.

• Maintain our NEUTRAL stance, premised on macro headwinds, ongoing geopolitical tensions, pressure on funding cost in the near term and uncertainties in yield curve which is likely to impact treasury income in 2024. We maintain BUY on CIMB (FV: RM6.90/share), Hong Leong Bank (FV: RM22.60/share) and RHB Bank (FV: RM6.30/share).

Source: AmInvest Research - 2 Jan 2024