Banking (Financial Services)
Banking Sector - Dec-24 Banking Stats: Considerable Improvement in Asset Quality
Mon, 03-Feb-2025 07:10 am
by Samuel Woo • Apex Research

Summary

  • Positives: (1) Solid loan growth, (2) CASA balances continue experience strong sequential month growth, (3) Considerable improvement in system GIL ratio. 

  • Negatives: -

  • Other things of note: (1) FD rates show slight uptick due to cyclical deposit competition, (2) Leading indicators have cooled, also due to cyclical effects, (3) ALR contraction is rather muted this time.

  • Maintain OVERWEIGHT call. Top pick: Public Bank (BUY; FV: RM4.51) and Hong Leong Bank (BUY; FV: RM24.79).

 

Loan growth +5.5%yoy / +0.8%mom

Loan growth remains resilient, with both retail and business loans stable.

  •  Retail loans: +6.9%yoy / +0.5%mom

    • Extremely consistent, as per usual.

  •  Business loans: +3.9%yoy /+1.0%mom

    • Solid growth, especially on a sequential month basis.

 

► Leading indicators

Applications have cooled over the last three months – non-concerning, as this is cyclical.

  • Approval rate: 62%.

 

Deposits +3.3%yoy / +0.9%mom

CASA continues to show impressive sequential quarter growth.

  •  FD growth: +3.9%yoy / +0.3%mom 

  •  CASA growth: +4.7%yoy / +1.2%mom 

 

  • LCR: 161%. 

  • Loan/Deposit ratio: 92.0%. 

 

GIL ratio1.44% / -7bps mom

Considerable improvement seen, likely due to end-year dressing activities.

  •  Notable deteriorations, mom: -

  •  Notable improvements, mom: Working capital -7bps, Construction -37bps, Personal financing -10bps, Credit cards -5bps. 

 

Interest rates

There is a slight uptick in FD rates due to end-year deposit competition, though this is expected – and the increase is somewhat muted.

  • ► FD rates (Conv.): Slight uptick.

  • ► FD rates (Isl.): Slight uptick.

  • ► Lending rates: ALR continues to compress, though by a more muted -2bps mom.

 

Keeping OVERWEIGHT stance. The banking sector’s outlook remains bright, premised on robust loan growth, improving COF, ideal conditions for NOII, and significant recoveries expected in several banks. We are confident that most banks can reposition their loanbook growth strategies to counter compressing loan yields. Our top picks include Public Bank (BUY; FV: RM4.51) and Hong Leong Bank (BUY; FV: RM24.79).

Recommendation: Overweight
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