- Mixed signals from both leading indicators. Loans applications growth was slower at 13.1% YoY in September 2013, compared to 20.7% YoY in August 2013. Loans approved rose at a slightly higher rate of 10.9% YoY in September 2013, compared to 9.2% YoY in August 2013.

-  Corporate segment driven by private segments. The corporate segment’s loans applied growth came in lower at 21.5% YoY in September 2013 compared to 28.7% YoY in August 2013. Nevertheless, the corporate segment’s loans approved growth was better at 15.2% YoY in September 2013, compared to the adjusted rate of -0.9% YoY in August 2013. The main positive takeaway for the corporate segment would be the robust growth in both the working capital and construction segments, indicating a shift towards private sector-led growth. This was offset by a weaker other purposes segment, which includes some level of public sector financing.

-  However there are signs of slowdown for the household segment for the past two months. This came partly from the auto segment, which is likely due to lingering effects of the post-festive Hari Raya season in August 2013. Otherwise, non-residential mortgage loans approved is also noticeably more muted, indicating perhaps a new level of cautiousness in non-residential purchases. Notably, the non-residential mortgage segment is one of the key drivers of loans growth in the recent past.

-  Third consecutive month of rising impaired loans. Gross impaired loans recorded a marginal uptick of 0.4% MoM in September 2013 compared to 0.3% MoM in August 2013. The main increase came from the working capital segment. Overall gross impaired loans ratio remained unchanged at 2.0% in September 2013 (August: 2.0%). Loan loss cover was lower at 97.5% in September 2013, compared to 98.2% in August 2013. This indicates that new working capital segment’s impaired loans were probably backed by some collateral values, with little loan loss provisioning made.

-  Maintain NEUTRAL. The latest banking statistics were positive in terms of the corporate loans indicators, which indicate a shift towards private sector-led demand for loans. Otherwise we deem the other indicators to be mixed, given the slower deposit as well as general uptick in impaired loans. Our sector rating is still NEUTRAL. Our TOP BUY is still Public Bank (PBB)

Source: AmeSecurities