• Keep OVERWEIGHT; Top Picks: AMMB, Alliance Bank Malaysia, CIMB, and Hong Leong Bank. Bank Negara Malaysia's Nov 2024 banking system statistics saw steady loans growth of +5.8% YoY, outpacing deposits growth of +3.6%. Asset quality remained healthy with system GIL continuing to decline across most sectors. We maintain our sector rating as we think the stable outlook for Malaysian banks under our coverage (MY Banks) provides investors with a defensive shelter.
• System loans grew 5.8% YoY (+0.6% MoM) in Nov 2024, as household loans grew 6.1% YoY, and business loans by +5.4% YoY. Sectors that recorded the highest increase in loans include finance (+17% YoY, +2% MoM) and wholesale & retail (+9% YoY, +1% MoM), which offset the decrease in loans from sectors such as agriculture (-5% YoY, flat MoM) and education & health (-3% YoY, -2% MoM). YTD, loans have grown at an annualised 5.1%, tracking our 5-5.5% YoY forecast for 2024.
• Lending indicators. On a 3-month moving average basis, Nov 2024 was a slower month as system loan applications fell 3% MoM (+2% YoY) and loan approvals declined by 2% MoM (-2% YoY). However, loan disbursements rose 1% MoM (-6% YoY). On a YTD basis, loan applications and approvals grew 4% and 3% YoY respectively, while loan disbursements lagged behind, declining by 2%, suggesting a pickup in loans in the coming months.
• System deposits rose 3.6% YoY (+0.9% MoM) - slower than loans growth - resulting in a higher LDR of 88% from 86% in the previous year. CASA grew at a faster pace (+5% YoY, + 2% MoM) than fixed deposits (+4% YoY, flat MoM) as the 12-month fixed deposit rate declined by 8bps YoY. This led to a higher CASA ratio of 31.3% in Nov 2024 (Oct 2024: 31.0%, Nov 2023: 31.0%).
• Asset quality. System GIL fell 5% YoY (flat MoM) with improvements in the manufacturing (-13% YoY, +2% MoM), mining (-18% YoY, -1% MoM), and education & health sectors (-13% YoY, -1% MoM). Household GILs also recorded a healthy 6% YoY decrease (flat MoM). As a result, system GIL ratio declined to 1.51% from 1.69% during the previous year (Oct 2024: 1.53%), while LLC stood at 91.2% (Oct 2024: 91.2%, Nov 2023: 92.9%).
• Other highlights. Capital ratios appear adequate - CET-1 and total capital ratios remained stable at 14.4% and 17.9% respectively. Elsewhere, SME loans in Oct 2024 continued its strong loans growth trajectory at +8% YoY (flat MoM), while the SME GIL ratio has been broadly stable at 2.99% (Sep 2024: 3.01%, Oct 2023: 3.13%).

Source: RHB Research - 2 Jan 2025