Banking
Sep 2013: Business loan application and approval rates are recovering

Loans grew 0.9% m-o-m or 9.4% y-o-y in Sep 2013 (Aug 2013: 0.7% m-o-m; 9.3% y-o-y) taking YTD loan growth to 7.5%. Retail loans (11.3% y-o-y) continue to outpace business loans (7.4% y-o-y).

Business loan applications and approvals rose 10% and 1% in Sep 2013 while the six-month moving average rate was negative but recovering. Retail loan applications and approvals rates remained robust at 11% and 15%. No change to our 2013 loan growth estimates of 10%.

Deposits grew 0.6% m-o-m; 7.7% y-o-y; 6.1% YTD. CASA growth resumed (2.1% m-o-m; 12.8% y-o-y; 6.9% YTD), while fixed deposits growth slowed (0.2% m-o-m; 13.5% y-o-y; 9.5% YTD).

Average lending yields were flat at 4.55% (but fell 21bps y-o-y) and 3-month fixed deposit rate were unchanged. Loan spreads were stable m-o-m.

Asset quality remains robust with gross NPL ratio at 1.95% (Aug-13: 1.97%). Capital ratios were stable with CET-1, Tier-1 CAR and total CAR at 12.1%, 13.0% and 14.4%, respectively.

Within the sector, we like RHBC (BUY; TP RM9.20). The NPL disappointment has been priced in and noninterest income growth will be supported by its enlarged investment banking franchise. We also like MAY (BUY; TP RM11.80) for the stock’s high dividend yields and potential upside from its international operations.

Source: HwangDBS Research - 1 Nov 2013