POSITIVE on the sector

We are positive on the continued upward trajectory in loans growth as well as CASA, both trends of which are positive for the banking sector. We maintain our POSITIVE view on the sector and our BUYs on AMMB, CIMB, Alliance Bank, Public Bank, HL Bank, and HLFG, in that order of preference.

Rebound led by non-HH lending

Industry loans growth was a faster 6.4% YoY in June 2024 (5.8% YoY in May 2024). While household (HH) loan growth was stable at 6.4% YoY, non-HH loan growth lent support, expanding at a faster pace of 6.4% YoY against 4.8% YoY in May 2024. The last time non-HH loans grew faster than 6% YoY was back in Oct 2022. On the consumer front, auto financing growth remained robust at 9.9% YoY while residential property lending growth was a stable 7.5% YoY. Commercial property lending has been on an uptrend, improving 6.5% YoY. On the corporate front, construction lending growth was a slower 4.9% YoY in June 2024 against 5.6% YoY in May 2024, but working capital loans jumped 6.8% YoY from 4.0% YoY in May.

CASA expanding faster than overall deposits

Deposit growth was 4.7% YoY in June 2024 (5.0% YoY in May 2024), and compares against 4.6% YoY in Dec 2023. Encouragingly, CASA continued to grow at a faster pace of 6.5% YoY (7.4% YoY in May 2024), which is positive for banks’ margins.

Asset quality improving

Absolute impaired loans were stable, declining 3.2% YoY end-June 2024. The industry’s gross impaired loans (GIL) ratio was 1.60% end-June 2024 and this compares against 1.65% end-Dec 2023 and 1.72% end-Dec 2022. The ratio is gradually trending towards the pre-COVID ratio of 1.51% end- Dec 2019.

Source: Maybank Research - 14 Aug 2024