Loans growth decelerated to 8.6% yoy vs. 9.3% as both household and business slowed.
Applications and approvals (Leading Indicators – LI) declined mom but both with yoy growth acceleration. Similar trends in business and household with lower mom LI but with accelerated yoy growth. Approvals rate declined but stayed above the 50% mark for two consecutive months.
Deposits yoy growth accelerated and sustained above 7% for three months, first since Jan 14. LD ratio higher with excess liquidity decreased to RM300bn.
Average lending rate (ALR) and spread slightly lower.
Asset quality stable, at or near strongest level. Capital ratios declined but remained robust.
Our Take
Continued positive yoy growth in business LI (eight and six consecutive months for applications and approvals, respectively) reaffirmed our view that business loans growth will help to mitigate the expected slowdown in household loans growth (albeit recent accelerations in yoy growth of LI). Thus, keeping our 2015 loans growth projection at 8%.
ALR relatively flat but intensified competition for funding to continue pressure NIM. New lending framework limited impact but upon implementation of new liquidity framework in Jun, may see more pricing discipline on both asset and liability as banks adhere more to risk-based pricing.
Strong asset quality and robust capital ratios intact which will support growth and active capital management.
Risks
Risk of recession and its impact on asset quality, portfolio losses (MTM and realized), non-interest income growth as well as more macro prudential measures.
Rating
NEUTRAL
Positives
Best proxy to the impact of ETP and RAPID(sector with third highest multiplier effect), domestic consumerism (albeit slower) and economy, strong asset quality, robust capital ratios, capital management and M&As.
Negatives
Competitive pressure on margin, higher livingcosts and tougher business environment increase the possibility of rise in delinquencies, portfolio losses from foreign outflow and rising burden of low income group.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....