Banking (Financial Services)
Banking Sector - Nov-24 Banking Stats: Watch the Average Lending Rate
Thu, 02-Jan-2025 07:55 am
by Samuel Woo • Apex Research

Summary

  • Positives: (1) Solid loan growth, (2) Leading indicators are strong, (3) A strong rebound in CASA balances is driving deposit growth, (4) Conventional FD rates continue improving. 

  • Negatives: (1) Notably sharp contraction in ALR.

  • Other things of note: (1) Not much movement in system GIL ratio – but considerable improvement seen in certain segments.

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

 

 Loan growth +5.8%yoy / +0.6%mom

Loan growth remains resilient, though retail loans have tapered down by a very small margin.

  • Retail loans: +7.1%yoy / +0.5%mom

    • Consistent for the most part: We want to observe residential mortgages and their performance in future quarters.

  • Business loans: +4.4%yoy /+0.7%mom

    • Still strong.

 

 Leading indicators

Both approvals and applications remain solid, though we note residential mortgage applications have been cooling down as of late.

  • Approval rate: 53%.

 

 Deposits +4.0%yoy / +0.9%mom

Strong rebound in CASA balances.

  • FD growth: +3.7%yoy / +0.2%mom 

  • CASA growth: +5.2%yoy / +1.9%mom 

 

  • LCR: 148%. 

  • Loan/Deposit ratio: 92.1%. 

 

► GIL ratio 1.51% / -1bps mom

Considerable improvement was seen in a number of segments.

  •  Notable deteriorations, mom: Personal financing +4bps.

  •  Notable improvements, mom: Securities -10bps, Construction -6bps, Working capital -9bps. 

 

Interest rates

Watch lending rates – loan yields have been in decline for quite some time now, but this month’s contraction is extremely steep. The residential mortgage market is exceptionally competitive.

  •  FD rates (Conv.): These rates continue their gradual decline downward.

  • ► FD rates (Isl.): Flattish.

  •  Lending rates: ALR contracted by 7bps mom, which is by far the steepest decline seen in the last couple of months.

 

Keeping OVERWEIGHT stance. An apparent downside is taking shape – loan yields are contracting sharply, as expected. Otherwise, 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. Our top picks include Public Bank (BUY; FV: RM4.51) and Hong Leong Bank (BUY; FV: RM24.79).

 

Recommendation: Overweight
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Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.461227 4.492117
EUR 4.632123 4.637427
CNY 0.613888 0.614502
HKD 0.573047 0.577030
SGD 3.281156 3.304154