AmInvest Research Reports

Author: AmInvest   |   Latest post: Wed, 12 May 2021, 11:43 AM


Banking - Loan growth within expectations; further conservative provisions booked

Author:   |    Publish date:

Investment Highlights

  • Industry loan growth eased further to 3.4% YoY in Dec 2020 from 3.8% YoY in Nov 2020. Growth in household loans remained stable at 5.0% YoY while non-household loan growth continued to slip to 1.0% YoY. Loan expansion of 3.4% in 2020 was in line with our expectation of 3.0–4.0% growth. For 2021, we keep our loan growth projection of 4.0–5.0%.
  • Pickup in growth of loan applications in Dec 2020 while loan approvals remained subdued. In Dec 2020, growth in industry loan applications was higher at 12.3% YoY vs. -5.1% YoY in Nov 2020. Dec 2020 saw an improvement in growth of loans applied by the agriculture, utilities, wholesale & retail trade, and restaurants & hotels, construction, real estate, finance, insurance and business activities, education, health & others as well as the household sectors.
  • Weighted average lending rate declined but no changes to base rate. We maintain our OPR projection of 1.75% in 2021 for now. However, we see some downside risk to this expectation should the MCO be extended past 4 Feb with stricter restrictions. We believe that all eyes will be on the weeks before the next MPC meeting on 4 Mar 2021 for any signs of pickup in economic growth.
  • Industry deposit growth stable at 4.5% YoY but growth in CASA moderated in Dec 2020. LD ratio for the sector remained stable at 87.6%. Correspondingly, the sector’s loan-to-fund ratio and the loan-to-fund and equity ratios was sustained at 82.5% and 72.0% respectively. Sector LCR eased slightly to 148.0% due to the lower LCR of commercial banks while that of the Islamic and investments increased compared to the preceding month. Industry CASA growth slipped to 19.3% YoY vs. 23.0% YoY in Nov 2020. Arising from this, the industry’s CASA ratio fell to 30.3%.
  • Continued upticks in impaired loans after 6-month automatic moratorium while banks raised further pre-emptive provisions against future credit losses. The industry’s outstanding impaired loans in Dec 2020 climbed by 3.1% MoM or RM867mil. This came largely from higher impairments of household credits and loans to the wholesale & retail trade, and restaurants & hotels loans, construction, transport, storage and communication sectors. The industry’s total GIL rose for the 2nd consecutive month to 1.6% while NIL ratio increased marginally to 0.99%. Total provisions for the sector increased by 3.2% MoM or RM965.4mil in Dec 2020 as banks continued to set aside pre-emptive provisions against future credit losses. This led to the rise in sector’s loan loss cover to 107.5% vs. 107.4% in Nov 2020.
  • Retain our OVERWEIGHT stance on the sector with our top BUYs on Hong Leong Bank (fair value RM19.30/share), RHB Bank (FV RM6.15/share) and Maybank (FV RM9.50/share) to ride on the economic recovery in 2021. We upgrade our call on ABMB to a BUY from HOLD (FV: RM2.80/share) due to the recent sharp retraction in share price.

Source: AmInvest Research - 2 Feb 2021

Share this

Related Stocks

Chart Stock Name Last Change Volume 
MAYBANK 8.21 +0.02 (0.24%) 4,726,000 
PBBANK 4.14 +0.04 (0.98%) 26,248,900 
RHBBANK 5.27 +0.16 (3.13%) 3,412,100 
HLBANK 17.70 +0.30 (1.72%) 894,600 
ABMB 2.54 -0.01 (0.39%) 218,500 

  Be the first to like this.

I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program

605  230  568 

Top 10 Active Counters
 FOCUS 0.06-0.005 
 GOCEAN 0.0450.00 
 MTOUCHE 0.285+0.005 
 TANCO-WB 0.07+0.02 
 PERMAJU 0.1450.00 
 TANCO 0.145+0.01 
 MINDA 0.145+0.02 
 UCREST 0.30+0.005 
 TAWIN-OR 0.065-0.005 
 CAREPLS 2.41+0.05 


1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!


2. ARB Berhad – Not As Good As It Seems. Be Cautious. The 1994 Investor
3. World’s most vaccinated nation is spooked by Covid spike (Chinese-made Sinopharm vaccine widely used in Seychelles) News1
4. 木材价格暴涨,这家公司竟然没有人买?! Swim With Sharks
5. Number of Covid 19 cases solely depends on Government's efficiency - Koon Yew Yin Koon Yew Yin's Blog
6. When will the pandemic end? Out of the box
7. Are you an INTELLIGENT INVESTOR? You can beat Buffett with THIS STOCK with 100% return in 2 months! Ultimate Stock Tips
8. U.S. Suffers Sharpest Rise in Poverty Rate in More Than 50 Years - Koon Yew Yin Koon Yew Yin's Blog