Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: AMMB
Banking sector
Maintain overweight: Bank Negara Malaysia (BNM) has announced three major new credit card measures which essentially raise the eligibility requirements.
First, the minimum income eligibility for new credit cardholders is now set at RM24,000 per annum from RM18,000 previously.
Second, card holders earning RM36,000 per annum and below can now only hold credit cards from a maximum of two issuers, while previously there was no limit in terms of the number of credit cards that may be held. Third, the maximum credit limit extended to a cardholder shall not exceed two times their monthly income per issuer.
Credit cards' contribution has increased from 1% of overall loans as at end-1996 to 3.4% of overall loans as at end-January 2011. We estimate credit cards made up 5.3% of overall retail loans (representative of household debt) as at end-January 2011, up from about 2.4% of overall retail loans as at end-1996.
In terms of overdue amounts (beyond the current payment period), we estimate them to make up about 8.1% of overall credit card payments outstanding as at end-January 2011. This has improved from an estimated 9.1% as at end-2009. This means that more than 90% of the outstanding amount is settled within the month.
Overall, credit card non-performing loans were RM553.4 million as at end-January 2011, translating into gross impaired loans ratio of 1.8% for this segment, below industry's 3.3%.
Gross impaired credit card loans have also declined by 2.8% from RM569.4 million at end-2009 (gross impaired loans ratio of 2.2%).
Overall, we would therefore consider credit cards debts to be small and at manageable levels. Thus, we believe the latest ruling is more pre-emptive in nature.
In terms of exposure to credit cards, Hong Leong Bank Bhd (HLBB) has the highest contribution to loans from credit cards at 5.8%, followed by EON Capital Bhd at 4.4% and CIMB Group Holdings Bhd at 3.9%. The ones with the least contribution from credit cards are Affin Holdings Bhd (0.4%), Public Bank Bhd (0.9%) and RHB Capital Bhd (2%).
We would be tweaking our loans growth forecasts for the banks to take into account the latest credit card ruling. However, we do not anticipate a major drop in overall loans for the banks arising from the latest measure on credit cards. We maintain our overweight stance on the banking sector. Our buys are still CIMB, HLBB, Maybank and RHB Cap. ' AmResearch, March 21
This article appeared in The Edge Financial Daily, March 22, 2011.
Company Name: MALAYAN BANKING BHD
Research House: AMMB
Banking sector
Maintain overweight: Bank Negara Malaysia (BNM) has announced three major new credit card measures which essentially raise the eligibility requirements.
First, the minimum income eligibility for new credit cardholders is now set at RM24,000 per annum from RM18,000 previously.
Second, card holders earning RM36,000 per annum and below can now only hold credit cards from a maximum of two issuers, while previously there was no limit in terms of the number of credit cards that may be held. Third, the maximum credit limit extended to a cardholder shall not exceed two times their monthly income per issuer.
Credit cards' contribution has increased from 1% of overall loans as at end-1996 to 3.4% of overall loans as at end-January 2011. We estimate credit cards made up 5.3% of overall retail loans (representative of household debt) as at end-January 2011, up from about 2.4% of overall retail loans as at end-1996.
In terms of overdue amounts (beyond the current payment period), we estimate them to make up about 8.1% of overall credit card payments outstanding as at end-January 2011. This has improved from an estimated 9.1% as at end-2009. This means that more than 90% of the outstanding amount is settled within the month.
Overall, credit card non-performing loans were RM553.4 million as at end-January 2011, translating into gross impaired loans ratio of 1.8% for this segment, below industry's 3.3%.
Gross impaired credit card loans have also declined by 2.8% from RM569.4 million at end-2009 (gross impaired loans ratio of 2.2%).
Overall, we would therefore consider credit cards debts to be small and at manageable levels. Thus, we believe the latest ruling is more pre-emptive in nature.
In terms of exposure to credit cards, Hong Leong Bank Bhd (HLBB) has the highest contribution to loans from credit cards at 5.8%, followed by EON Capital Bhd at 4.4% and CIMB Group Holdings Bhd at 3.9%. The ones with the least contribution from credit cards are Affin Holdings Bhd (0.4%), Public Bank Bhd (0.9%) and RHB Capital Bhd (2%).
We would be tweaking our loans growth forecasts for the banks to take into account the latest credit card ruling. However, we do not anticipate a major drop in overall loans for the banks arising from the latest measure on credit cards. We maintain our overweight stance on the banking sector. Our buys are still CIMB, HLBB, Maybank and RHB Cap. ' AmResearch, March 21
This article appeared in The Edge Financial Daily, March 22, 2011.
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