- The press reported a possible freeze on loans for ASB scheme. The Edge Malaysia reported that banks are considering a freeze on loans provided to finance the Amanah Saham Bumiputera (ASB)’s unit trust investment scheme, as a mean of reducing the country’s rising personal debt. It was reported that banks are discussing the issue with a possibility to freeze the ASB loans from November this year.

- Possible curb on personal loans as well as for those with ASB loans. The news report said that after the Budget 2014 announcement in October, there will also be a curb on personal loans given to those who borrow to invest in the ASB scheme.

- ASB loans made up about 3% of total industry loans. We estimate that ASB financing loan is about RM36bil or 3.0% of total industry loans of RM1,172bil. Nevertheless, these makes up a large portion, i.e. 55.8% of the industry’s total purchase of securities loans of RM63.8bil currently. We estimate that Maybank has the largest market share of ASB financing, at circa 50%. The other two banks are almost equal, with RHB Cap’s total market share of ASB financing loan (including EASY and conventional RHB Bank loans) at 25.2% in 1HFY13, while CIMB’s market share was 23.3%. We believe Affin’s market share is small.

- Some impact on CIMB, Maybank and RHB Cap in terms of ASB loans growth. In terms of contribution to total gross loans, ASB financing made up about 3.7% of CIMB, 5.4% of Maybank and 7.6% of RHB Cap’s total gross loans. We expect growth to be slightly truncated by the possible new rulings.

- Personal loans growth may be affected as well. Personal loans contribution range between 2.4% to 6.7% for the banks, with some impact from the possible curb on personal loans.

- Maintain Neutral. We estimate that a 1ppt decline in our loans growth forecasts lead to less than 1ppt decline our net earnings. Thus, the immediate impact to our net earnings forecasts may not be so significant, although we believe the curbs will affect selected consumer segments’ growth. We maintain our cautious stance on the sector. Our sector top pick is Public Bank (PBB).

Source: AmeSecurities