Banking (NEUTRAL çè)
Sep Stats – Business Segment Strike Back
- Loans growth accelerated to 9% yoy on faster business but partly offset by slower household.
- Leading indicators higher with strong numbers from business. Approval rate now higher at 49.9%. Deposits yoy growth also accelerated with ample liquidity.
- Reaffirm view revival in business loans growth to mitigate slowdown in household. Maintain 2014 projection at 9%.
- ALR higher 4th consecutive month and qoq. Results in 3QCY14 to show more stable NIMs. Positive but reiterate that boost from OPR hike temporary.
- Asset quality slightly lower but still near strongest level. Construction spike, on watch. Qoq improvement, thus, unlikely to significantly impact earnings in 3QFY14.
- Capital ratios improved for second consecutive month, will support active capital management.
- Maintain NEUTRAL and top picks (Maybank, RHB Cap and AFG). CIMB rated Trading Buy.
TNB (BUY çè)
Improved Outlook in FY15-16
- Reported core profit for 4Q14 at RM1.3bn and FY14 at RM5.4bn, above HLIB’s RM5bn expectation, due to lower than expected operational cost (fuel costs), depreciation and net interest expenses.
- Despite the lower coal price situation, TNB still suffered from cost under-recovery of ~RM600m due to higher utilization of gas and alternative fuels and high LNG price. TNB is suggesting the government to offset the cost with the capacity payment savings from PPA extension.
- TNB guided for higher mix of coal power generation in FY15-16 from the recovery of Tg Bin and Jimah, as well as new commencement of Tg Bin extension and Manjung 4.
- Not overly concern on delay in tariff adjustments, as we expect the low coal price to maintain and improved coal power generation mix to work in TNB’s favour.
- Maintained BUY with higher TP of RM15.00 (from RM13.80), after we revised up our earnings by 9-10% and roll-forward our valuation into FY08/16.
Economics
Highlights of BNM Statistics (Sep 2014)
- Broad money (M3) growth rebounded to 5.2% yoy after hitting a 12½-year low of 4.8% yoy in August. Narrow money (M1) growth fell further to a 5-year low of 6.7% yoy (Aug: +7.7% yoy).
- Despite a mild improvement, subdued monetary expansion reaffirms our view that economic activity had slowed down in 3Q14 after posting a robust growth of 6.3% in 1H14. We maintain our 2014 full year GDP growth estimate at 6.0%.
- Notwithstanding the policy rate pause in September, household loan-deposit growth gap narrowed slightly in the month. Household loan growth inched lower to 10.7% yoy (Aug: +11.0% yoy) while that of household deposits held steady at 6.3% yoy.
- The subdued financial activities in September pointed to moderate domestic economy expansion. Together with cautious outlook in selected major economies, we believe BNM’s current priority is to safeguard growth momentum. We expect BMM to keep OPR unchanged at 3.25% in the upcoming MPC meeting on 6 Nov.
Traders Brief
Some more legs to go but faces stiff resistances at 1860-1870 zones
- On the back of record highs on Wall St last Friday and the spillover effect from BOJ’s surprised stimulus measures, KLCI may witness further rebound in the early part of this week. Nevertheless, profit taking activities are likely to emerge following a sharp 5% rally from recent low of 1766 (FIG2) ahead of the BNM policy meeting on 6 Nov and the start of Nov reporting season, given the grossly overbought slow stochastics. Weekly resistances are near 1860-1870 zones whilst supports fall on 1840-1850 levels.
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