- Leading loan indicators continued to be driven by the corporate segment. Loans applications had somewhat improved to a flattish growth of 0.1 % YoY in November 2014, if compared to the decline of 4.3% YoY seen in October 2014. Loans approved growth was again in positive territory, although growth was at a marginally slower rate of 10.8% YoY in November 2014, vs. 13.1% YoY in October 2014. Leading indicators continued to be mainly driven by the corporate segment, the sixth consecutive month of healthy growth for this segment. The household segment remained muted.

- Industry’s loan-to-deposit ratio (LDR) was unchanged at 86.6% in November 2014. The industry’s loan-to-deposit ratio (LDR) was unchanged 86.6% in November 2014, compared to 86.6% in October 2014 and the new recent peak of 86.8% in September 2014. Still, this is the eleventh consecutive month of LDR remaining above 85%.

- Another month of relatively large spike in the 3-month interbank rate trend. The 3-month Klibor rates had spiked up again to 3.84% in November 2014, compared to the more normalised level of 3.36% in end-October 2014 and 3.36% in end-September 2014. Bank Negara Malaysia (BNM) said short-term interbank rates were broadly stable in November 2014. BNM added that interbank rates of longer maturities, however, trended higher due to an increase in demand by banks for more stable funding, which led to competition among banks to attract corporate deposits by offering higher deposit rates. BNM said the resultant increase in funding cost was transmitted to lending rates in the interbank market.

- Impaired loans improved on a MoM basis in November. Gross impaired loans continued to improve on a MoM basis in November 2014. Most segments improved although there is now a discernible uptick in the residential mortgage segment for the second consecutive month. Gross impaired loans ratio was unchanged at 1.7% in November 2014, compared to 1.7% in October 2014. Loan loss cover came off marginally though to 103.3% in November 2014 (October 2014: 103.8%).

- Maintain NEUTRAL. Revenue indications in November continued to be backed mainly by the corporate segment, while impaired loans had improved for the second consecutive month. However, interbank rates had spiked up, despite the stable LDR. We remain NEUTRAL on the sector. 

Source: AmeSecurities