Total loans and advances grew at a softer pace of 5.6% YoY (vs 6.0% in August 2024) in September 2024. By segment, consumer loans expanded by 6.4% YoY (+0.5% MoM), while the business loans eased to grow by 4.5% YoY (+0.3% MoM), vs an increase of 5.2% in August 2024. Nevertheless, overall loan growth expanded by 3.4% YTD, vs 3.1% in September 2023.

Business loans grew by 2.0% YTD, compared to an increase of 1.0% YTD in September 2023. YoY, loans for Working Capital increased by 5.3%. By sector, loans for Education, Health, & Others, Electricity, Gas, Steam & Air and Mining & Quarrying continued their downward trend with 7.1%, 16.1% and 5.5% YoY declines, respectively. Meanwhile, loans for Agriculture, Forestry & Fishing also slipped again in September, declining by 4.2% YoY (August 2024: -0.3%). Elsewhere, other segments which experienced YoY growths include Accommodation & Food Services (+10.7% YoY), Finance, Insurance, & Business Activities (9.6% YoY), Wholesale and Retail Trade (9.5% YoY), Water Supply, Sewerage & Waste (8.9% YoY), Transportation & Storage (+6.1% YoY), Information & Communication (+4.6% YoY), Manufacturing (+2.4% YoY) and Construction (+1.6% YoY).

Capital market activities remained healthy in the first nine months of 2024, with net funds raised by the private sector through new shares and debt securities issuance amounting to RM94.2bn (excluding redemptions), of which funds raised via new issues of shares/warrants ballooned to RM6.1bn (YTD 2023: RM3.1bn) and the new issues of debt securities grew to RM88.1bn (YTD 2023: RM83.bn).

Consumer loans supported by residential mortgages and HP

Total consumer loans accelerated by 6.4% YoY (+0.5% MoM). Residential Mortgages, which account for a sizeable chunk (around 64%) of total consumer loans, continued to support growth in the segment, increasing at a healthier pace of 7.3% YoY (September 2023: +7.2% YoY). Loans for the purchase of passenger cars also climbed at an encouraging rate of 9.5% YoY (September 2023: +9.1% YoY), while the yearly drawdowns for credit cards and loans for personal uses broadened by 8.6% YoY (September 2023: +13.2% YoY) and 3.7% YoY (September 2023: +4.6% YoY). However, drawdowns for the Purchase of Securities declined again by 6.6% YoY (September 2023: -11.2% YoY).

Decline in loan applications and approvals

Total loan applications declined by 4.9% YoY (-9.2% MoM). Consumer loan applications contracted by 9.0% YoY (-16.9% MoM), while business loan applications slipped by 0.4% YoY (+0.5% MoM). By sub-segment, loan application for Personal uses and Credit cards improved by 14.3% YoY (-12.4% MoM) and 4.9% YoY (-2.5% MoM). However, loan application for Residential Properties, HP Loans and Purchase of Securities declined by 1.3% YoY (-13.7% MoM), 1.5% YoY (-11.2% MoM) and 71.9% YoY (-62.4% MoM).

Total loans approved also contracted in September (-3.8% YoY, -6.6% MoM), underpinned by lower consumer loan approvals of -0.1% YoY (-5.9% MoM). Meanwhile, business loan approvals also fell by 6.9% YoY (-7.2% MoM), following three months of consecutive YoY gains. The overall approval rate stood at 54%, underpinned by business and consumer approval rates of 57% and 50%, respectively. By major sub-segments, approval rates for the purchase of Residential Properties stood little changed at 41% (September 2023: 42%), while the approval rate for NonResidential Properties climbed to 54% (September 2023: 34%). Meanwhile, the approval rate for HP loans slipped to 53% (September 2023: 61%).

Contraction in total impaired loans

By segment, consumer-impaired loans decreased by 4.0% YoY (-0.5% MoM), while impaired business loans fell by 5.8% YoY (-2.7% MoM). The ratio of net impaired loans to total gross loans for the system stood at 1.5%, improving from 1.7% a year ago. Compared to September 2023, the GIL ratio for Residential, Non-Residential loans and Credit Cards strengthened by 20 bps, 10 bps and 20 bps to 1.2%, 1.6% and 0.8%, respectively. The GIL ratio for HP loans was steady at 0.5%. Elsewhere, the GIL ratio for some major business segments, such as Manufacturing improved by 60 YoY to 1.7% while Construction’s GIL was steady at 4.8%. Wholesale, Retail and Trade deteriorated by 10 bps YoY to 2.2%. By purpose, the GIL ratio for loans taken for Working capital improved by 40 bps to 2.2% in September 2024.

Positive CASA growth, Average lending rates slipped

Total deposits (excluding repo) increased by 3.5% YoY (+0.3% MoM). Total CASA also steadily increased by 5.4% YoY (+1.3% MoM) in September. The CASA ratio rose to 31.3% from 30.7% last year. The system's liquidity coverage ratio (LCR) softened to 148% (September 2023: 151%), while the loan-to-fund ratio was at 83.8% (September 2023: 82.5%). Elsewhere, the average loan rate slipped to 5.23% in September 2024 from 5.26% last month and 5.49% in September 2023. Meanwhile, the banking system's capital buffers remained more than adequate, with a CET1 of 14.5% and a Total Capital Ratio of 18.2%.

2024 loan growth forecast maintained at 6.1%

Taken together, we maintain the 2024 loan growth forecast at 6.1%, underpinned by consumer and business loan growth of 6.3% and 5.9%. We reiterate our OVERWEIGHT call on the sector based on rising loan growth, stabilising NIM, the potential for higher NII, gradual acceleration in fee income, and healthy capital and liquidity buffers. Potential downside risks include declining asset quality due to concerns over rising inflationary pressures amid ongoing subsidy rationalisation, persistent external shocks, weaker contributions from overseas operations, and consistently high overhead expenses. Despite these risks, the sector's outlook remains positive, supported by solid performance indicators and growth prospects. We recommend BUY for Public Bank, AMMB, CIMB, Maybank, Hong Leong, and Alliance Bank. HOLD RHB Bank and Affin Bank.

Source: TA Research - 4 Nov 2024