- Leading loan indicators decelerated in September 2015. Loans applications growth declined by 2.0% YoY in September 2015 based on our estimates, compared with +3.1% YoY in August 2015. Loans approved contracted at a larger rate of 15.2% YoY in September 2015, from -9.1% YoY in August 2015. The corporate segment was noticeably softer in September 2015, while the household segment remained muted post implementation of GST in April.

- Deposit growth was still subdued in September 2015. Deposit growth remained subdued at 5.4% YoY in September 2015, compared with +5.1% YoY in August 2015.

- Industry LDR remains above the 90% level for the second consecutive month. The industry’s loan-to-deposit ratio (LDR) remained above the 90% level, at 90.1% in September 2015, from 90.4% in August 2015. This is the second consecutive month that the industry LDR surpassed the 90% level since December 2002’s 90.5% LDR level.

- Fourth consecutive month of increase in impaired loans. Gross impaired loans continued to increase, by 1.9% MoM in September 2015 (August 2015: +0.2% MoM). There were uptrends in residential mortgage, non-residential mortgage, and working capital impaired segments. However, gross impaired loans ratio was unchanged at 1.6% in September 2015, compared with 1.6% in August 2015, due to the higher loan base. Loan loss cover remained below the 100% level at 98.1% in September 2015 – broadly unchanged from 97.6% in August 2015. This indicates that not all newly impaired loans are fully provided for, in our view.

- Maintain NEUTRAL. The September 2015’s leading indications were noticeably softer in terms of corporate loans trends. Industry LDR remained above 90%, while impaired loans registered five consecutive months of upticks. We maintain our sector rating at NEUTRAL.

Source: AmeSecurities Research - 2 Nov 2015