- Leading loan indicators continued to be supported by the corporate segment. Loans applications growth recovered 7.0% YoY in July 2015, from an adjusted 3.6% YoY growth rate seen in June 2015. Loans approved growth rate retraced to -0.9% YoY in July 2015, from +15.1% YoY in June 2015. Both leading indicators continued to be supported by the corporate segment, while the household segment remained muted post implementation of GST in April.

- Deposit growth slowed significantly. Deposit growth slowed down significantly to only 4.5% YoY in July 2015, from 7.7% YoY in June 2015. The slower growth was due to the demand deposit and fixed deposit segments, as well as the business deposits.

- Industry LDR continued to hit a new recent peak. The industry’s loan-to-deposit ratio (LDR) rose a few notches to reach another new recent peak of 89.3% in July, from 88.0% in June 2015. This is the highest level since January 2003’s estimated 89.6%. This is the nineteenth consecutive month of LDR remaining above 85%.

- Third consecutive month of increase in impaired loans. Gross impaired loans continued to increase on a MoM basis in July 2015, by 0.4% (June 2015: +2.7% MoM). The increase came from a large lumpy upturn in the construction segment, and marginal upticks in the retail segments. Gross impaired loans ratio remained unchanged at 1.6% in July 2015, compared to 1.6% in June 2015. Loan loss cover remained below the 100% level, at 97.3% in July 2015 (June 2015: 97.5%). This indicates that not all newly impaired loans are fully provided for, in our view.

- Maintain NEUTRAL. Leading loan indicators continued to be led by the corporate segment in July 2015. However, industry LDR continued to creep up, while impaired loans posted three consecutive months of upticks. We maintain our sector rating at NEUTRAL.

Source: AmeSecurities Research - 1 Sep 2015