- Leading loan indicators remained muted in June. Loans applications remained weak at -13.0% YoY in June 2013, almost unchanged from the -12.0% YoY level in May 2013. On a brighter note, loans approved growth declined at a slower rate of 5.5% YoY in June vs. -16.9% YoY in May.

- Led by the corporate segment. This weak indicators was again caused by much softer corporate segment with corporate loans applications decreasing 42.4% YoY in June, from an already large contraction of -23.8% YoY. As for the corporate loans approved segment, this declined -23.5% YoY in June, following a large -43.2% YoY drop in May.

- But better household segment. On a more positive note, the household segment’s loans applied have rebounded somewhat with growth of 10.5% YoY in June, compared to a decline of -4.9% YoY in May. Loans approved for the household segment growth is also stronger at 6.3% YoY in June from 1.3% in May.

- Industry loans growth at 9.0% in June is the slowest in more than three years. Industry loans growth continued to slow considerably to 9.0% YoY in June from 9.3% in May, the second consecutive month of loans growth coming in below 10% since March 2010.

- Gross impaired loans has now improved, after two consecutive months of upticks. The absolute impaired loans has now been lowered by -0.9% MoM, following two months of upticks of +1.9% MoM in May and +0.2% MoM in April. Gross impaired loans ratio remained unchanged at 2.0% in June compared to 2.0% in May. Loan loss cover rose to 99.8% in June from 99.2% in May. Based on recent newsflow, we expect some asset quality issues for specific accounts for RHB Cap, and perhaps Maybank. We also expect some upticks in consumer NPLs for CIMB Niaga.

- Maintain neutral. Our sector rating is neutral, with no major top buys. 

Source: AmeSecurities