RHB Research: Overweight on banking stocks. Top Picks- CIMB (good progress in ROE-lifting strategies), Maybank (ESG leadership and attractive dividends), and AMMB (earnings recovery, undemanding valuation). November banking system data pointed to a continued recovery, with loan demand from business segments rebounding from a decline the month before.
Banks remain the best proxy for economic recovery and a key beneficiary of higher interest rates. System loans continued to recover by a healthy 0.9% MoM (+4.3% YoY), reflecting the gradual pick-up in economic activities. Annualised growth strengthened to 4.3%, from 3.7% for the 10 months. The month-on-month recovery was led mainly by mortgages and working capital loans. Non-household loan growth of 0.96% MoM outpaced that of household loans.
On loan demand, RHB states that the recovery is gaining pace. System loan applications, on a 3- month moving average basis, were up 11.6% MoM – both applications from the household and business segment increased 17.3% and 2.4% MoM, with the latter marking a recovery from a 1.6% dip in October. On a monthly basis, the growth in loan applications was robust at 15.5%, boosted mainly by the household segment – applications for mortgages and working capital loans improved 12% and 34%.
System deposits grew 3.6% with 11M21 annualised growth at 8.2%. As a result, system LDR decreased to 83.2%, from 85.9% in October. Deposit growth in November was supported by the 2.8% rise in CASA deposits, with CASA growth momentum picking up. System CASA ratio improved to 42.0% from 41.4%.
System GILs declined 2.3%, moderating YoY growth to 0.6%. The month-on-month decline was broad-based, however, there were some upticks in GILs for the purchase of consumer durable goods to 3.47%. All in, this led to a lower 1.47% system GIL ratio, compared with 1.52% in October.
SME financing was up 0.3% in October, lifting 10 months annualised growth to 3.4%. The improvement was broad-based, with wholesale & retail (+0.6%), and education, health & others (+2.8%) being the key drivers, albeit with weakness seen in agriculture (-1.1%). GILs declined 1.0% MoM, with stable GIL ratio of 2.45%.
