- Unexpected spike in loan applications growth. Loans applications spiked up unexpectedly by 40.8% YoY in November 2013, much higher than the 16.3% YoY pace seen in October 2013. This was driven partly by the working capital segment, which jumped by 114.8% YoY in November 2013, compared to 21.8% YoY in October 2013. There were no further breakdown of working capital loans applied, although in absolute terms, the amount applied of RM21bil in November 2013 against an average of RM11bil-RM14bil for most of months of 2013 suggest there may be some one-off lumpy elements in November 2013. In addition, there was also a large increase in residential mortgage loans applied, with growth of 60.2% YoY in November 2013 (October 2013:43.8% YoY) This is likely due to preemptive consumer behaviour before the more stringent property financing measures kick-in after the year-end.

- Different story for loans approved. Despite the hefty rise in loan applications, loans approved contracted by 8.6% YoY in November 2013, after a flat +0.2% YoY in October 2013. The November 2013 month marks the first month of contraction after four consecutive months of growth.

- Deposit growth decelerated to slowest growth in nearly ten years. Deposits growth decelerated to 6.9% YoY in November 2013, vs. 7.8% YoY in October 2013. Deposit growth is the slowest in nearly ten years since April 2003’s 5.6% YoY growth rate. Industry’s loan-to-deposit ratio (LDR) was higher at 84.8% in November 2013, compared to 84.1% in October 2013. LDR is at the highest level in more than nine years since February 2004’s 84.9%.

- Impaired loans crept up. Gross impaired loans rose 1.3% MoM in November 2013, after a brief improvement following September 2013’s -0.7% MoM drop. There were increases across the board for most segments in November 2013. Overall gross impaired loans ratio remained unchanged at 2.0% in November 2013 (September 2013: 2.0%), due to rising loan base. Loan loss cover was marginally lower at 97.1% in November 2013, if compared to 97.7% in October 2013.

- Maintain NEUTRAL. We think that the banking data remained ambivalent in November despite the unexpected increase in loans applied. All in all, we believe there are still no hints of sustainability in leading indicators. Deposit growth has decelerated, LDR has now tightened further, while there were upticks in impaired loans. Our sector rating is still NEUTRAL.

Source: AmeSecurities