Banking Sector and BAT, 1 Apr 2015

Bank sector

Foreign holdings of MGS fell marginally to RM145.7bil in February 2015 (-RM1.0bil or -0.7% MoM), from RM146.7bil in January 2015. However, foreign holdings as a percentage of total MGS outstanding increased to 45.1% in February 2015, compared to 43.8% in January 2015, due to the lower MGS outstanding base.  

Excluding foreign holdings in MGS, we estimate the industry’s gross loan-to-adjusted-deposit ratio to be at 89.7% in February 2015, broadly unchanged from January 2015’s 89.8%.

Overall excess net deposit (total deposit less loans) on a MoM basis had improved marginally to RM300.6bil in February 2015, from RM299.8bil in January 2015. Excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to be better as well at RM154.9bil in February 2015 vs. RM153.1bil in January 2015. Nevertheless, excess liquidity had almost halved if we exclude foreign-held MGS from the deposit in the system. 

The 10-year MGS yield was relatively stable at 3.869% in end-February 2015, compared to 3.831% in end-January 2015 and a recent high of 4.148% recorded in end-December

Based on the latest industry overall data, foreign holdings in MGS is marginally lower, but liquidity had improved in February 2015. Still, we maintain our stance of a likely less ample domestic liquidity situation ahead given the still historically high foreign holdings of MGS. Maintain NEUTRAL on the sector.