- Leading loan indicators softened in April 2015. Loans applications continued to be muted with a flattish growth of only 0.7% YoY in April 2015, although this is an improvement from the decline of 4.0% YoY seen in March 2015. Loans approved contracted 2.4% YoY in April 2015, from a flat growth of 1.7% YoY in March 2015.

- Retracement in loans growth... Industry loans growth retraced back to below the 9% level, with growth at 8.8% YoY in April 2015, after a short spike to 9.2% YoY in March 2015.

- …and deposit growth too. Deposit growth also retraced slightly to 8.3% YoY in April 2015, after an improvement to 9.0% YoY in March 2015. Consequently, the industry’s loan-to-deposit ratio (LDR) moved back up to 86.8% in April 2015, after easing to 86.6% in March 2015. The recent peak was 87.4% in February 2015. This is the sixteenth consecutive month of LDR remaining above 85%.

- Three-month interbank rate rose marginally. As for interbank rates, the 3-month Klibor rate had increased marginally by 3bps MoM to 3.73% in April 2015, from 3.70% in March 2015.

- Substantial improvement in impaired loans. Gross impaired loans decreased substantially by 4.2% MoM in April 2015. The reduction was mainly from the purchase of securities and working capital segments. However, the large substantial improvement may be indicative of write-offs rather than organic improvement in performing loans. Gross impaired loans ratio was unchanged at 1.6% in April 2015, compared to 1.6% in March 2015. Loan loss cover was raised back to above 100%, with April 2015’s loan loss cover standing at 101.8%, against 98.7% in March 2015.

- Maintain NEUTRAL. Leading indicators remained generally unexciting in April 2015 – probably indicative of post GST spending. Deposit growth, industry LDR, and interbank rates have generally reversed the brief improvement seen in March 2015. We maintain our sector rating at NEUTRAL.

Source: AmeSecurities Research - 1 Jun 2015