Journey to Wealth
Banking Sector - Holiday hangover in January 2012 OVERWEIGHT
Leading indicators registered marginal declines. Loans applications growth turned in anegative 2.7% growth in January 2012 (December 2011: +10.7%), the first YoYdecline in five months since August 2011. Loans approved also declinedmarginally by 2.9% in January 2012 from an 11.3% rise in the previousmonth.
Propped up largely by the corporate segment. Loansapplications and approvals were led by the corporate segment, with an estimatedgrowth of 28.9% and 78.1%, respectively. In contrast, the household segment'sapplications and approvals fell 20.6% and 27.7%, respectively in January. We believe this was due to two main factors:(1) Implementation of the new Responsible Lending Guideline, which came intoeffect on 1 January 2012; and (2) extended holiday season effect, with theChinese New Year on 23 January 2012 falling close to the year-end period.
Uptick in overall gross impaired loans overall, butrelatively marginal. Overall grossimpaired loans recorded an uptick of 1.3% MoM, after posting a 1.1% MoM declinein December 2011. There were increases across the board for the corporatesegment, but the uptick was marginal ranging from between 0.8% and 4.0%MoM.
Likely due to seasonal effect. For retail impaired loanssegment, there were also some increases in the auto segment, residentialproperty, personal use, credit cards and consumer durables, but again theupticks were quite marginal ranging between 1% and 6% MoM. We believe this waslikely caused by historically slower repayments during the school holiday andfestive season spending. Given that upticks are quite marginal, we believethese should not give rise to any major cause for alarm.
No conclusive evidence yet. January's banking statisticssuggest likely weaknesses in leading loan indicators as well as selected grossimpaired loans. However, we believe there could be some seasonal impact as well, due to the festive ChineseNew Year period, which means that the January 2012 data is not yet sufficientlyconclusive of a much slower trend ahead.Gross impaired loans have seen some upticks, but these are not significant.Thus, we continue to believe there should be no major cause for alarm.
Overweight. Oursector rating is still OVERWEIGHT, with BUYs now being AFG, CIMB, HLBB,Maybank, MBSB and PBB. Our top big-cap pick is now PBB, as we foresee asustainable rise in dividend, and it remains as the prime beneficiary of a changeover to full FRS139 accounting basis.HLBB remains as our top mid-cap pick, with further upgrades likely given itsstrong execution on merger synergies. AFG is now our top pick in the small capspace, given a marginal retracement in share price, with its latest quarterlyresults providing a strong basis for further earnings upgrades ahead.
Source: AmeSecurites
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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....
