Highlights

• Among the 7 banks under our coverage, AFG, CIMB and Public Bank’s earnings were within our forecasts. Affin, AMMB and RHB Cap’s earnings missed our expectations, while Maybank was slightly ahead of our forecast.

• 4 out of 8 banks beat system loan growth. On yoy basis, AFG, CIMB, HL Bank and Public Bank registered domestic loan growth of 8.5%, 11.7%, 9.9% and 11.6% respectively, above system loan growth of 7.9%.

• Mo st banks’ depo si t growth lagged loan growth. Deposit growth of most banks continued lagging behind loan growth (with the exception of CIMB, Maybank and RHB Cap), resulting in higher LDR (on yoy basis).

• Asset quality intact. With the exception of Maybank (which GIL ratio increased by 23bps qoq to 1.4%), overall GIL ratio remained largely stable, which in turn indicates that overall asset quality remains intact.

• Overall capital position remained robust and wel l positioned to weather headwinds, evidenced by CET ratios of more than 10% for all banks under our coverage.

• Moving into 2016… We note that most banks guided for lower loan and deposit growth (on yoy basis) and further NIM compression. On a more positive note, asset quality is expected to remain robust, albeit a slight deterioration may be seen given tougher economic environment.

Risks

• Risk of recession and its impact on asset quality, portfolio losses (MTM and realized), as well as non-interest income growth.

Rating

NEUTRAL

• Posi tives – Best proxy to 11MP and RAPID, domestic consumption (albeit slower) and economy; strong asset quality; robust capital ratios; and capital management.

Negatives

• Competitive pressure on margin, GST impact on consumer sentiment, tougher environment increase chances of higher defalts and portfolio losses from foreign outflow.

Top Picks

• Maybank and RHB Cap. We have a trading buy call on CIMB.

Source: Hong Leong Investment Bank Research - 9 Mar 2016