- Leading loan indicators decelerated in August 2015. Loans applications growth slowed to a pedestrian rate of only 3.1% YoY in August 2015, at more than halved the 7.0% YoY growth rate seen in July 2015. Loans approved declined substantially by 9.1% YoY in August 2015, from -0.9% YoY in July 2015. Again, 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 slightly better in August 2015. Deposit growth was better at 5.1% YoY in August 2015, compared with only +4.5% YoY in July 2015.

- Industry LDR surpasses the 90% level. However, the industry’s loan-to-deposit ratio (LDR) has now surpassed the 90% level, to 90.4% in August 2015, compared with 89.3% in July 2015. This is the first time the industry LDR has surpassed the 90% level since December 2002’s 90.5% LDR level.

- Fourth consecutive month of increase in impaired loans. Gross impaired loans rose only marginally by 0.2% MoM in August 2015 (July 2015: +0.4% MoM). There was a substantial improvement in the construction segment, but this was offset by a large increase in the working capital impaired loans segment. Elsewhere, there were ongoing upticks in the retail segments. Gross impaired loans ratio remained unchanged at 1.6% in August 2015, compared with 1.6% in July 2015. Loan loss cover remained below the 100% level, at 97.6% in August 2015 (July 2015: 97.3%). 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 August 2015. However, industry LDR continued to creep up, while impaired loans posted four consecutive months of upticks. We maintain our sector rating at NEUTRAL.

Source: AmeSecurities Research - 1 Oct 2015