- Leading loan applications stage a minor recovery.  Loans applications managed to recover to a growth of 9.1% in September 2012 compared to a 9.9% contraction in August 2012. Loans approved recovered somewhat with a smaller contraction of -1.1% (August 2012: -11.9%), although September 2012 will still be the fourth consecutive month of decline.

- Household sector leads growth.  The household segment's loans applications registered a growth of 11.8% in September 2012 (August 2012: -6.8%), the strongest pace in three months. As for loans approved, the household segment grew 10.1% following a -3.7% drop in August 2012. For loans applied, the growth was led by the auto segment, while for loans approved, growth came largely from the non-residential mortgage segment. 

- Slower pace of growth in deposit. The latest banking statistics indicate some slowdown in the deposit segment, which had done relatively well over the last one year in terms of higher growth. Deposit growth slowed to 11.6% in September 2012 from August 2012's 13.5% This brings the growth back in line with the monthly average of 11.1% in 2011, although still above 2010's 8.5%. Though deposit growth was  slower, LDR eased to 82.0% in September 2012 from 82.2% in August 2012.   

- Lumpy increases in selected gross impaired loans. Gross impaired loans increased on MoM basis by RM815mil, or 3.5% in September 2012. This was the first monthly increase since April 2012. 

- Contributed by the construction and working capital segment. The increase was contributed by lumpy upticks in the construction and working capital segments, which rose 5.9% and 10.0% MoM respectively.  . However, gross impaired loans ratio was unchanged at 2.2%. Loan loss cover is still healthy at 97.1% in September 2012, albeit lower than August 2012's 101.7%.  

- We expect slower 2H.  The September 2012 banking statistics indicate a minor recovery in leading loan indicators, although the corporate segment continued to slow down. Further, deposit growth is now slowing. We expect a slower 2H in terms of corporate loans growth. Elsewhere, we also foresee the household's residential and non-residential mortgage segments to remain soft as consumers are likely to adopt a wait-and-see attitude pending the general election. Our buys are CIMB, RHB Cap and PBB.