- Subdued leading indicators from the household segment. Loans applications growth was sustained at 9.5% YoY in March 2014, when compared to 8.5% YoY in February 2014. However, loans approved growth decelerated to 4.0% YoY in March 2014, from 9.5% YoY in February 2014. The main support to growth was the working capital segment. Otherwise, the household segment growth was quite subdued, with flattish growth trend for both the applications and approvals segments.

- Industry LDR remained above 85%. Deposits growth was stable at 6.9% YoY in March 2014 (February 2014: +6.8% YoY). Industry’s loan-to-deposit ratio (LDR) had somewhat eased to 85.1% in March 2014, from 85.7% (revised from 85.5% previously) in February 2014. This marks the third consecutive month of LDR remaining above 85%.

- 3-month interbank rate surpassed 3.30%. The 3-month Klibor remained somewhat elevated at 3.33% as at end-March 2014 (+2bps MoM), compared to 3.31% at end-February 2014. Klibor is has been hovering close to 3.30% for three consecutive months, when compared to the 3.10% range a few months ago. We believe the higher interbank rate reflects market expectations of an eventual increase in interest rates.

- Some improvement in asset quality in contrast to two previous consecutive months of upticks. Gross impaired loans had improved given there was a 0.4% MoM drop in March 2014. This is in contrast to the previous two consecutive months of MoM increases. There were improvements for all the consumer segments in March 2014, compared to upticks seen in the auto, residential mortgage, personal use, credit card, and consumer durables segments in February 2014. This indicated that the February 2014 upticks may be mainly due to a seasonal blip. Gross impaired loans ratio was unchanged at 1.8% in March 2014 (February 2014: 1.8%). Loan loss cover was also stable at 104.6% in March 2014 (February 2014: 104.5%).

- Maintain NEUTRAL. The industry data provided some mild relief, given the improvements in asset quality data, an easing LDR, and stable interest rates. Leading indicators remains subdued in our view. Maintain sector rating at NEUTRAL.

Source: AmeSecurities