Banking sector
Maintain neutral: The pickup in non-household (non-HH) loan growth in August 2017 faded in September, contributing to a slowdown in overall loan growth. Nevertheless, annualised loan growth remains stable at 3.5%, while loan applications and approvals are trending in the right direction. We maintain our industry loan growth forecasts of 4.7% for this year and 4.8% for next year. It’s still “neutral” on the sector with a “buy” call on CIMB Group Holdings Bhd and BIMB Holdings Bhd.

Industry loan growth in September 2017 was a slower 5.2% year-on-year (y-o-y) versus 5.8% in the month before on account of slower expansion in non-household loans of 5.4% y-o-y versus 6.8% y-o-y previously. 

On an annualised basis, however, loan growth was stable at 3.5% y-o-y as household loan growth improved to 4.3% from 4.1%, mitigating the slowdown in non-household loan growth to 2.4% from 2.8% in August. 

On a three-month moving average basis, loan applications rose 9.2% y-o-y last month, while loan approvals continued to expand at a double-digit pace of 11.1% y-o-y. 

Positively, while working capital loan applications contracted for the 16th consecutive month on a three-month moving average basis, the pace of decline has been tapering off from as high as -23.4% y-o-y in June 2017 to just -3.7% y-o-y in September 2017.

Total system deposit growth was a marginally slower 4.5% y-o-y in September 2017 versus 5% y-o-y in August 2017. Current account and savings account (CASA) nevertheless continued to expand at a faster pace of 8.8% (+9.5% y-o-y in August). 

Business deposits expanded 11.3% y-o-y in September 2017, this being the first time y-o-y growth has hit a double-digit pace since October 2012. Consumer deposits, however, slowed to 3.7% y-o-y in September from 4.2% y-o-y in August 2017.

Absolute gross impaired loans (GIL) rose 6.5% y-o-y in September versus 6.4% y-o-y in August, but the overall GIL ratio was stable at 1.67%, as was the loan loss coverage at 81.2%.

Industry loan growth slipped to 5.2% y-o-y in September 2017 from 5.8% in August 2017, as non-household loan growth expanded at a slower pace of 5.4% y-o-y versus 6.8% y-o-y previously. Household loan growth nevertheless held steady at 5% y-o-y.

On an annualised basis, however, loan growth was stable at 3.5% y-o-y as household loan growth improved to 4.3% from 4.1%, mitigating the slowdown in non-household loan growth to 2.4% from 2.8% in August.

Household loan growth has held steady at 5% y-o-y over the past four consecutive months. While lending to share margin financing and auto softened in September 2017, household loan growth was bolstered by stable growth in mortgages and commercial property loans as well as credit card and personal financing.

On the non-household front, working capital loan growth slowed to just 4.9% y-o-y from 7.2% y-o-y in August. On a segmental basis, lending to construction, transport/storage and finance/business came in softer y-o-y. — Maybank IB Research, Nov 2