September’s Bank Negara Malaysia’s (BNM) banking system statistics showed that YoY loans growth was maintained at 4.3%, with equally stable lending indicators – particularly from the business segment.
RHB’s Malaysia Sector Update cited today (Nov 1) that system deposits continued to outpace CASA growth, and system GILs declined by 1.5% YoY. We maintain our NEUTRAL weighting on the sector amid a backdrop of normalising earnings growth heading into 2024.
System loans grew 4.3% YoY (+0.8% MoM) in September (QoQ: +1.6%), with household loans up by 5.6% YoY (+0.6% MoM) and non households loans up by 2.6% YoY (+0.9% MoM). This was supported by steady growth across most loan purposes, with the exception of construction (-0.7% YoY, +0.6% MoM) and purchase of securities (-11% YoY, -1% MoM).
The sectors that recorded stronger loan growth include transport & communications (+7.5% YoY, -0.6% MoM) and finance (+6.3% YoY, +1.7% MoM). YTD, system loans have increased by 3% (annualised: +4.1%).
RHB maintains their 2023 system loans growth forecast at 4-4.5% YoY.
Strong lending indicators – On a 3-month moving average (3MMA) basis, growth in loan applications stood at 4.1% YoY (+5% MoM) and loan disbursements increased by 7.2% YoY (+2.3% MoM). However, loan approvals dipped by 1.6% YoY (+5.4% MoM). The MoM growth in applications and approvals was driven by the business segment (applications: +12.4% MoM, approvals: +11.5% MoM) while the household segment recorded a 0.9% MoM decrease for both measures.
System deposits grew 4.3% YoY (+1.2% MoM) (QoQ: +1.4%) – This continues to be driven by fixed deposits (FD) (+6.8% YoY, +0.7% MoM), while CASA saw a slight decline YoY (-0.7% YoY, +0.7% MoM). On a MoM basis, both FD and CASA grew at the same pace, hence the CASA ratio remained steady at 30.7% in September (Aug 2023: 30.8%, Sep 2022: 31.7%). The 12-month FD rate continued to decline to 2.85% after reaching a peak of 2.9% in May (Aug: 2.86%).
Healthy asset quality – System GILs dropped in September (-1.5% YoY, -2.6% MoM) with almost all sectors recording YoY declines barring wholesale & retail (+29.9% YoY), mining & quarrying (+3.7% YoY), and households (+8.2% YoY). Consequently, the system GIL ratio dropped to 1.72% (Aug 2023: 1.78%, Sep 2022: 1.82%), the lowest level since Dec 2022 (1.72%). System LLC increased to 91.2% from 90.6% in August (Sep 2022: 97.3%).
Other highlights – The banking system’s capital buffers remain sufficient – CET-1 remains at 14.5%, system LDR at 85.7%, and liquidity coverage ratio is high at 150%. For the SME segment, loans grew 6.1% YoY in August but was flat MoM. Loans for wholesale & retail (+7.9% YoY, +0.6% MoM) and transport & communication (+16.7% YoY, +1.2% MoM) segments led the overall loan growth. The SME GIL ratio continued to increase up to 3.17% from 3.09% in July (Aug 2022: 2.90%).
RHB’s Top Picks: CIMB, Hong Leong Bank, and AMMB.
4.3% YoY loan growth in Sep 2023: Maybank IB
Meanwhile, Maybank Investment Bank (Maybank IB) cited its loan growth which was seen at 4.3% YoY in Sep 2023 was slightly trailing their full-year industry loan growth forecast of 4.6%.
Positively, loan applications have expanded for the second consecutive month, CASA contraction has narrowed while the industry’s GIL ratio is improving.
Maybank IB maintains a POSITIVE stand on the sector, with BUYs on PBK, CIMB, HLBK, HLFG and ABMB.
Loan applications expanded for second consecutive month
Industry loans growth was 4.3% YoY in Sep 2023, slightly faster than 4.2% YoY in Aug 2023.
Household (HH) loan growth was 5.6% YoY (5.5% YoY in Aug 2023) while non-HH loan growth was 2.6% YoY (2.2% YoY in Aug 2023). In terms of consumer loans, share margin financing contracted by a larger 11.2% YoY in Sep 2023.
Non-residential property lending, as well as personal and credit card financing gathered pace during the month. Having contracted YoY in June and Jul 2023, loan applications expanded 8.1% YoY in Aug 2023 and 11.4% in Sep 2023.
Smaller CASA contraction
Deposit growth slowed further to just 2.4% YoY in Sep 2023 from 2.5% YoY in Aug 2023. Including repos, deposit growth was a faster 4.3% YoY. CASA contracted for the ninth consecutive month, but by just -0.7% YoY against -2.3% YoY in August and -4.2% YoY in July 2023.
The industry’s CASA ratio was 29.2% end-Sep 2023. This compares against a pre-COVID CASA ratio of 26.5% end-Dec 2019 as well as a peak CASA ratio of 32.9% in Apr 2022.
GIL ratio improved
Impaired loans were relatively stable, up just 2.8% YTD in absolute terms. The industry’s gross impaired loans (GIL) ratio improved to 1.72% in Sep 2023 from 1.78% in Aug 2023. This compares to a pre-COVID ratio of 1.51% end-Dec 2019.
