- Leading indications remain mixed. Loans applications saw a marginal growth of 4.3% YoY in June 2014, compared to the flat -0.1% YoY trend seen in May 2014, driven mainly by a rebound in the corporate segment. Loans approved growth came in at -5.5% YoY in June 2014, slightly better than the - 8.9% YoY recorded in May 2014. The stronger corporate loans applications were not reflected in the approved segment, which continued to contract. Otherwise, there was a pick-up in the household segments approved loans growth, driven mainly by the non-residential segment.

- Industry’s loan-to-deposit ratio (LDR) climbed further to 85.8% in June 2014 from 85.4% in May 2014. This is the sixth consecutive month of LDR remaining above 85%. The latest LDR is a new recent high for the industry, given that this has surpassed February 2014’s 85.7%.

- 3-month interbank rate rose further but at a slower pace. The 3-month Klibor rose further to 3.60% in June 2014, but the pace of increase has now slowed to only 7bps MoM, compared to the 15bps MoM increase to 3.53% in end-May 2014.

- Some improvement in impaired loans. Gross impaired loans improved by 0.5% MoM in June 2014, due mainly to the construction segment. This reversed the previous month’s uptick, suggesting that this may involve a lumpy corporate account. Otherwise, there were ongoing upticks seen in a few consumer segments - upticks in the purchase of securities, passenger vehicles, residential mortgage, personal use, credit card, and the consumer durable segments. There was also a new uptick in the non-residential mortgage segment.

- Gross impaired loans and loan loss cover are stable. Given the higher loan base, gross impaired loans ratio was unchanged at 1.8% in June 2014, vs. 1.8% in May 2014. Loan loss cover remained stable at 104.4% in June 2014, vs. 104.9% in May 2014.

- Maintain NEUTRAL. Leading indicators for June 2014 remained mixed, while deposit growth continued to be muted. Industry LDR had climbed further to 85.8% - a new recent high. Industry LDR remained above the 85% level. We remain NEUTRAL on the sector.

Source: AmeSecurities