Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
Banking sector
Maintain overweight: Loans applications started the year with solid growth of 22.2% year-on-year (y-o-y) in January 2011 (December 2010: +36.6%). While the corporate segment was the main driver of December 2010's jump in loan applications growth of 36.6%, this segment has somewhat retraced to a slower growth of 18.7% y-o-y in January 2011 (December 2010: +83.7% y-o-y).
Loans approved expanded at the same rate of 17.3% y-o-y in January 2011, unchanged from 17.3% in December 2010. Again, the corporate segment was somewhat softer, recording a decline of 3% y-o-y in January 2011. The latest January 2011 statistics highlight that the corporate segment is off to a slow start for 2011. However, we are not overly perturbed as this is expected to pick up towards 2H11 with the roll-out of the government's economic transformation programme (ETP).
The consumer loans segment remains the main driver to overall loans growth with a 13.4% y-o-y increase. But the corporate loans growth has almost caught up with a 12.6% y-o-y growth in January 2011.
Overall deposits managed to record a higher growth of 9.1% y-o-y in January 2011, the strongest growth rate over the past 12 months. The higher increase came from acceleration in demand and savings deposits, which is positive.
The industry's impaired loans data has been readjusted. With the adjustment, January 2011 will now be the second month of uptick in impaired loans on a y-o-y basis. January 2011's impaired loans rose 4.1% y-o-y, against +3.6% y-o-y in December 2010.
However, the industry's gross impaired loans ratio is unchanged, at 3.1% in January 2011 (December 2010: 3.1%), indicating that the rise in impaired loans was in line with the overall higher loans growth. Loan-loss cover stood at 90% in January 2011 (December 2010: 90%).
The latest leading loan indicators indicate that corporate sector loans are likely to retrace. We expect this to pick up pace later with the roll-out of the government's ETP in 2H11. Deposit growth has now picked up and is backed by stronger core deposits. The main downside risk is still net interest margin (NIM) but we are encouraged by the latest second consecutive month-on-month rise in average lending rate.
The second and new risk that is now being flagged is the y-o-y uptick seen in impaired loans. However, gross impaired loans ratio and loan-loss cover are still stable, indicating that the potential upward revisions to loan loss provision estimates may be limited.
We are maintaining our sector rating at 'overweight', with our top picks being CIMB Group, Malayan Banking Bhd and Hong Leong bank Bhd. ' AmResearch, March 2
This article appeared in The Edge Financial Daily, March 3, 2011.
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
Banking sector
Maintain overweight: Loans applications started the year with solid growth of 22.2% year-on-year (y-o-y) in January 2011 (December 2010: +36.6%). While the corporate segment was the main driver of December 2010's jump in loan applications growth of 36.6%, this segment has somewhat retraced to a slower growth of 18.7% y-o-y in January 2011 (December 2010: +83.7% y-o-y).
Loans approved expanded at the same rate of 17.3% y-o-y in January 2011, unchanged from 17.3% in December 2010. Again, the corporate segment was somewhat softer, recording a decline of 3% y-o-y in January 2011. The latest January 2011 statistics highlight that the corporate segment is off to a slow start for 2011. However, we are not overly perturbed as this is expected to pick up towards 2H11 with the roll-out of the government's economic transformation programme (ETP).
The consumer loans segment remains the main driver to overall loans growth with a 13.4% y-o-y increase. But the corporate loans growth has almost caught up with a 12.6% y-o-y growth in January 2011.
Overall deposits managed to record a higher growth of 9.1% y-o-y in January 2011, the strongest growth rate over the past 12 months. The higher increase came from acceleration in demand and savings deposits, which is positive.
The industry's impaired loans data has been readjusted. With the adjustment, January 2011 will now be the second month of uptick in impaired loans on a y-o-y basis. January 2011's impaired loans rose 4.1% y-o-y, against +3.6% y-o-y in December 2010.
However, the industry's gross impaired loans ratio is unchanged, at 3.1% in January 2011 (December 2010: 3.1%), indicating that the rise in impaired loans was in line with the overall higher loans growth. Loan-loss cover stood at 90% in January 2011 (December 2010: 90%).
The latest leading loan indicators indicate that corporate sector loans are likely to retrace. We expect this to pick up pace later with the roll-out of the government's ETP in 2H11. Deposit growth has now picked up and is backed by stronger core deposits. The main downside risk is still net interest margin (NIM) but we are encouraged by the latest second consecutive month-on-month rise in average lending rate.
The second and new risk that is now being flagged is the y-o-y uptick seen in impaired loans. However, gross impaired loans ratio and loan-loss cover are still stable, indicating that the potential upward revisions to loan loss provision estimates may be limited.
We are maintaining our sector rating at 'overweight', with our top picks being CIMB Group, Malayan Banking Bhd and Hong Leong bank Bhd. ' AmResearch, March 2
This article appeared in The Edge Financial Daily, March 3, 2011.
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