KL Trader Investment Research Articles

Malaysia Banks: BNM Stats - October ’21: Consumer Skew

Publish date: Fri, 10 Dec 2021, 10:02 AM
This is a personal investment blog where I keep important research articles relating to KLSE companies.

Bank Negara Malaysia (BNM) has released the banking system data for October 2021, which marks the second consecutive month of mobility restrictions easing. Domestic credit-card spend surged to a record high, while consumer loan applications rose month-on-month as transaction curtailment eases. Meanwhile, loan repayments continued to improve, which is a positive read-through for asset quality.


  • Strong consumer indicators: Economic reopening tailwinds are evident in October’s banking system numbers. Overall takeaways remain positive for sector fundamentals. Headline consumer indicators continue to improve, with credit-card spend +14% month-on-month (m/m). Excluding foreign card holders (international borders still closed), domestic credit-card spend (+15% m/m) hit a record high RM11.8bn. Loan applications also skewed towards the consumer book (+15.3% m/m) vs non-consumer (-8% m/m), led by residential mortgages (+18% m/m) and passenger vehicles (+34% m/m). While headline working capital loans is still growing +0.9% m/m (low base effect), applications for working capital were relatively weak (-12% m/m).
  • Asset quality indicators, improving: Loan repayments are a useful leading indicator for underlying asset quality stress. Headline repayments improved +3.1% m/m (Sept: +2.8% m/m) as moratoria unwinds. Consumer loan repayments rebounded +8.5% m/m (Sept: +6.8% m/m). This is roughly 2.2% repayment/outstanding; which is 15% shy of the pre-Covid averaged 2.6%. Overall, this is a highly encouraging trend. Meanwhile, non-consumer loans are seeing high credit recycling with a jump in repayment/disbursement rates.
  • Loan impairment recognition continues to be distorted by generous repayment assistance programs. Headline gross impaired loans (GIL) ratio improved to 1.55% (Sept: 1.62%) on the back of a -2.7% m/m reduction in GIL, let by consumer loans (-4% m/m).

Liquidity Starting to Tighten

  • Deposit growth (+4.4% year-on-year (y/y)) continues to outpace loans growth (+3.3% y/y), but there are some signs of tightening liquidity. Sequentially, deposits contracted -0.5% m/m, led by current account and savings account (CASA) (-0.6% m/m). Headline CASA ratios remain near-record highs at 31.7%, and the decline in CASA appears to be driven by corporates. Headline loan-to-deposit ratio tightened to 87.2% in October (Sept: 86.4%), while liquidity coverage ratio remains healthy at 153%. The banks’ capital ratios fell slightly to 14.3% common equity tier 1 (CET1), though still at healthy levels.

Positive outlook, especially for consumer books

  • The improving bank-sector numbers tracks well with MQ Research’s expectations for an economic reopening and continues to affirm its preference for consumer banks. With underlying asset quality improving in-step with the economic reopening, MQ Research continues to place a higher emphasis on asset growth. Loan application data suggest consumer-focused banks will outperform on this front. MQ Research’s order of preference: RHB > HLBK > Public > CIMB > MAY > AMMB.

Source: Macquarie Research - 10 Dec 2021

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