- Leading loan indicators softened in February 2015. Loans applications fell 17.1% YoY in February 2015, after posting a relatively stronger 10.0% YoY growth rate in January 2015. Loans approved growth flattened to -0.8% YoY in February 2015, compared to 9.3% YoY in January 2015. This is likely due to a shorter working month arising from the Chinese New Year holidays.

- Industry’s loan-to-deposit ratio (LDR) rose to a new recent peak of 87.4% in January 2015. The industry’s loanto- deposit ratio (LDR) rose to a new recent peak of 87.4% in February (January 2015: 87.3%). This is the fourteenth consecutive month of LDR remaining above 85%.

 - Fifth consecutive month of contraction for fixed deposit segment. Fixed deposit declined 2.2% YoY in February 2015, similar to the contraction of 2.8% YoY seen in January 2015. This is the sixth consecutive month of contraction for the fixed deposit segment. This is puzzling considering numerous good fixed deposit campaigns in the past few months.

- Second consecutive month of uptick in impaired loans. Gross impaired loans rose 1.1% MoM in February 2015, the second consecutive MoM increase. These came mainly from the retail segments – i.e. purchase of securities, auto, residential mortgage, personal use and credit cards. Given the higher loan base, gross impaired loans ratio was unchanged at 1.7% in February 2015, from 1.7% in January 2015. Loan loss cover was reduced to 97.9% in February 2015, against an adjusted 99.9% in January 2015.

- Maintain NEUTRAL. Revenue indicators softened in February, most likely due to the impact of the holiday season. Liquidity remains tighter given the higher industry LDR. Impaired loans recorded an uptick for the second consecutive month, but this time it was mainly driven by the retail segments. We maintain our sector rating at NEUTRAL.

Source: AmeSecurities