- Leading indicators remain slow.  Loans applications growth slowed to a single-digit  level of 5.8% in April 2012 from 14.1% in March 2012. Loans approved registered a double-digit decline of 11.4% in April 2012 (March 2012: -2.2%), the first double-digit decline in loans approved growth since August 2009's 22.9% drop.  

- Wait-and-see stance in April.  April 2012 indicated slower growth for both the household and corporate segments. Industry sources have indicated that business borrowers have turned cautious since April 2012 with some reducing inventory levels. The household segment's growth continued to be affected somewhat by the new Responsible Lending Guideline, which now requires a stricter documentation process prior to loans being approved. We are maintaining our loans growth forecast of 6.4% for the sector for 2012, which is significantly lower than the 13.6% achieved in 2011.

- Overall loans growth sustained at 12.1%. Total loans growth was at 12.1% in April 2012, compared with 12.2% in March 2012. Retail loans (65.5% of total loans) increased 13.1% (March 2012: 13.3%). Corporate loans growth was unchanged at 10.1% (March 2012:10.1%) 

- Gross impaired loans stable.  Overall gross impaired loans recorded a marginal uptick of RM60.4mil or 0.2% MoM in April 2012, with upticks seen in the transport vehicle, passenger cars, non-residential mortgage, personal use, consumer durables and other purposes segments. 

- Impaired loans benign, in our view. However, the upticks are benign, in our view. Gross impaired loans ratio was unchanged at 2.5% in April 2012 (March 2012:2.5%). Loan loss cover was slightly lower at 91.2% compared with 92.0% in March 2012. This was likely due certain banks accounting for full FRS139 with write-backs in collective assessment carried forward.

- Maintain overweight. Banking statistics remained subdued in April 2012, with continuing indications that loans growth for the household segment will likely remain softer ahead on the back of the Responsible Lending Guideline. In addition, the corporate segment is also now relatively softer, with the latest indications that business borrowers are likely to have turned cautious. Gross impaired loans remain benign. Our sector rating is still OVERWEIGHT, with BUYs now being AFG, HLBB, Maybank, PBB and RHB Cap.