Potentially Lower Credit Cost Ahead

Industry loans growth moderated to 6.0% YoY in Aug 2024 from 6.4% YoY end-Jul 2024, largely on account of slower working capital loan expansion. We maintain our industry loan growth forecast of 5.5% for 2024. CASA continues to expand though at a slower pace, while asset quality continues to improve, pointing to lower impairment provisions ahead, especially amid fairly robust economic growth. POSITIVE maintained on the sector, with BUYs on AMMB, CIMB, PBK, RHB, HLBK and HLFG.

Slower Working Capital Loan Growth

Industry loans growth slipped to 6.0% YoY in Aug 2024 from 6.4% YoY in Jul 2024. While household (HH) loan growth was stable at 6.4% YoY (6.5% YoY in Jul 2024), non-HH loan growth moderated to 5.4% YoY versus 6.4% YoY in Jul 2024. On the consumer front, mortgages expanded at a steady pace of 7.5% YoY. Auto financing growth moderated to 9.8% YoY from 10.1% YoY in Jul 2024, and personal financing was a tad slower at 4.2% YoY versus 4.4% YoY in Jul 2024. Credit card lending, however, picked up pace to 8.3% YoY from 7.8% YoY in Jul 2024. On the non-HH front, commercial property lending growth was a slightly faster 7.0% YoY versus 6.8% YoY in Jul 2024, but working capital loan growth slipped to 5.4% YoY from 7.1% YoY.

Slower CASA Growth, But Still in Positive Territory

Deposit growth moderated to 3.1% YoY end-Aug 2024 from 4.8% YoY endJul 2024. CASA growth was a slower 4.1% YoY against 6.4% YoY end-Jul 2024, but remains in positive growth territory for the 11th month.

Trending Toward Pre-COVID Levels

Absolute impaired loans improved, declining 5.9% YoY end-Aug 2024. The industry’s gross impaired loans (GIL) ratio was 1.58% end-Aug 2024 and this compares against 1.65% end-Dec 2023 and 1.72% end-Dec 2022. The ratio is trending down towards the pre-COVID ratio of 1.51% end-Dec 2019.

Source: Maybank Research - 11 Oct 2024