Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
Maintain overweight: The latest leading loan indicators have staged a strong rebound in March 2011 after a soft patch in February. This indicates that February data was likely affected by the Chinese New Year holidays. We are encouraged that fixed deposit and private sector deposits (from the business and individual segments) have continued to strengthen. Gross impaired loans data is also better.
Having said that, we believe leading loan indicators may slow going forward due to the supply chain disruption from the Japan earthquake. We believe the supply disruption has yet to be felt, largely due to a rundown in stocks. We expect slower leading loan indicators to start to show from May onwards. This could affect loans growth, or if the situation is prolonged, cash flow of business borrowers.
For the upcoming results season, we believe Malayan Banking Bhd (Maybank) and Malaysia'' Building Society Bhd (MBSB) will likely report results ahead of market expectations. Based on CIMB Niaga's results last week, we believe CIMB Group Holdings Bhd will likely be marginally below market consensus estimates. RHB Capital Bhd (RHBCap) is also likely to be below market consensus estimates given that a large chunk of earnings growth (non-interest income) will be related to the government's Economic Transformation Programme (ETP).
We foresee a stronger 2H11, as we still expect a pickup in corporate loans then with the likely rollout of the ETP. We are maintaining our sector rating at 'overweight', with our 'buy' ratings for CIMB, Maybank, MBSB, Hong Leong Bank Bhd and RHBCap.
Loans application growth rebounded in March 2011 to 37.5% year-on-year (y-o-y) from 17% in February. Loans approved growth also picked up strongly to 44.7% in March, after rising by only 7.1% in February. Both were driven by much higher corporate loans applied and approved growth, which is positive.
Residential mortgage growth was resilient at 19.8% y-o-y in March 2011 (February: 23%). Growth has certainly picked up against January's'' growth of 4.3% and December 2010's 8.6% when we believe there was some initial impact from the implementation of a loan-to-value (LTV) limit on the third mortgage and above at a maximum of 70% since the beginning of November 2010.
Auto loan applications growth was surprisingly resilient at 13.5% in March, likely due to consumers buying ahead of anticipated supply disruption due to the Japan earthquake.
Overall loans growth was stronger at 13.2% in March, compared with 12.2% in February. March growth accelerated in both the consumer and corporate loans segments. The consumer loans segment (64.7% of total loans) grew 13.7% in March against 13.2% in February. Corporate loans growth picked up to 12.3% in March 2011, ahead of February's +10.2% y-o-y.
Deposit growth was maintained at 9.7% y-o-y. The fixed deposit segment rose 8% in March against 6.1% in February 2011. This was the strongest expansion rate in 18 months since September 2009's 8.3%. Deposits growth from the private sector (business and individuals) has continued to strengthen for the fifth consecutive month.
Gross impaired loans remain benign. The industry's gross impaired loans ratio was slightly better at 3.2% in March 2011, compared with 3.3% in February, and was certainly better than the 3.6% of March 2010. Loan loss cover has gone up further to 91.1% in March from 89.6% in February. ' AmResearch, May 3
This article appeared in The Edge Financial Daily, May 4, 2011.
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
Maintain overweight: The latest leading loan indicators have staged a strong rebound in March 2011 after a soft patch in February. This indicates that February data was likely affected by the Chinese New Year holidays. We are encouraged that fixed deposit and private sector deposits (from the business and individual segments) have continued to strengthen. Gross impaired loans data is also better.
Having said that, we believe leading loan indicators may slow going forward due to the supply chain disruption from the Japan earthquake. We believe the supply disruption has yet to be felt, largely due to a rundown in stocks. We expect slower leading loan indicators to start to show from May onwards. This could affect loans growth, or if the situation is prolonged, cash flow of business borrowers.
For the upcoming results season, we believe Malayan Banking Bhd (Maybank) and Malaysia'' Building Society Bhd (MBSB) will likely report results ahead of market expectations. Based on CIMB Niaga's results last week, we believe CIMB Group Holdings Bhd will likely be marginally below market consensus estimates. RHB Capital Bhd (RHBCap) is also likely to be below market consensus estimates given that a large chunk of earnings growth (non-interest income) will be related to the government's Economic Transformation Programme (ETP).
We foresee a stronger 2H11, as we still expect a pickup in corporate loans then with the likely rollout of the ETP. We are maintaining our sector rating at 'overweight', with our 'buy' ratings for CIMB, Maybank, MBSB, Hong Leong Bank Bhd and RHBCap.
Loans application growth rebounded in March 2011 to 37.5% year-on-year (y-o-y) from 17% in February. Loans approved growth also picked up strongly to 44.7% in March, after rising by only 7.1% in February. Both were driven by much higher corporate loans applied and approved growth, which is positive.
Residential mortgage growth was resilient at 19.8% y-o-y in March 2011 (February: 23%). Growth has certainly picked up against January's'' growth of 4.3% and December 2010's 8.6% when we believe there was some initial impact from the implementation of a loan-to-value (LTV) limit on the third mortgage and above at a maximum of 70% since the beginning of November 2010.
Auto loan applications growth was surprisingly resilient at 13.5% in March, likely due to consumers buying ahead of anticipated supply disruption due to the Japan earthquake.
Overall loans growth was stronger at 13.2% in March, compared with 12.2% in February. March growth accelerated in both the consumer and corporate loans segments. The consumer loans segment (64.7% of total loans) grew 13.7% in March against 13.2% in February. Corporate loans growth picked up to 12.3% in March 2011, ahead of February's +10.2% y-o-y.
Deposit growth was maintained at 9.7% y-o-y. The fixed deposit segment rose 8% in March against 6.1% in February 2011. This was the strongest expansion rate in 18 months since September 2009's 8.3%. Deposits growth from the private sector (business and individuals) has continued to strengthen for the fifth consecutive month.
Gross impaired loans remain benign. The industry's gross impaired loans ratio was slightly better at 3.2% in March 2011, compared with 3.3% in February, and was certainly better than the 3.6% of March 2010. Loan loss cover has gone up further to 91.1% in March from 89.6% in February. ' AmResearch, May 3
This article appeared in The Edge Financial Daily, May 4, 2011.
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