- Household segment led growth in leading indicators. Loans applications growth registered a stronger rate of 16.3% YoY in October 2013, compared to 13.1% YoY in September 2013. Overall loans approved growth slipped back to only +0.2% YoY in October 2013 after a relatively stronger growth in the three preceding months (+10.9% YoY in September 2013, +9.2% YoY in August 2013, +6.4% YoY in July 2013).

- Leading indicators mainly held up by the household segment. Leading indicators were held up mainly by the household segment, while the corporate segment softened in October. Thus, growth was not broad-based, as the earlier pick-up in loan demand from the corporate and working capital segments in September were not sustained. Household segment bucked the two preceding months’ slowing trend with stronger growth rates in October, but this could be due to pre-emptive behaviour ahead of the Budget announcements. We think that the latest indicators are still mixed, and are neither broad-based nor robust enough to back a loans growth upgrade.

- Industry’s loan-to-deposit ratio (LDR) surpasses the 84% level. LDR inched up to 84.1% in October 2013 vs. 83.9% in September 2013. LDR is at the highest level in more than nine years since October 2004’s 84.0%.

- Muted private deposit trend. In terms of deposits by holder, the business segment growth remained sluggish at 0.9% YoY in October 2013 vs. an already subdued 1.7% YoY rise in September 2013. This is the slowest growth rate for business deposit in more than ten years since October 2002’s -0.9%. Individuals deposit growth was also slower at 7.1% YoY in October 2013, compared to 7.4% YoY in September 2013. This signals the third consecutive month of growth rate below 8% for the individual segment, compared to the 10%-13% range in 2012.

- Maintain NEUTRAL. The latest industry data indicates a softer corporate loan demand, with leading indicators backed mainly by the household segment. We still deem the other indicators to be mixed, such as the rising LDR and slowing private demand deposits growth. Our sector rating is still NEUTRAL. Our top pick is still Public Bank (PBB). 

Source: AmeSecurities