Corporate lending broadens as consumer credit stays firm
From AB Capital's The Opening Bell: Three Moves
Event
Systemwide bank lending accelerated to 11.6% YoY in August from 10.7% in July. Business loans grew 10.5%, supported by utilities, water and waste management, and transportation and storage, while real estate lending remained comparatively weak.
View
We think the mix is constructive for bank earnings because growth is broadening into infrastructure- and utility-linked corporate lending, where ticket sizes are larger and credit quality is generally more resilient. Weak real estate lending still argues for caution on banks with heavier property concentration.
Catalyst
Consumer loan growth strengthened to 17.0% from 15.4%, led by cards and salary loans. That is positive for yields and fees, but it also raises provisioning sensitivity. If unsecured retail growth stays near the high teens, credit cost discipline becomes increasingly important to preserve earnings quality.
Action
In our view, the data favor BDO where diversified corporate franchises and stronger underwriting should capture the acceleration with less reliance on property. MBT also benefits from its reserve buffer. We would be more selective on consumer-heavy banks until credit costs and non-performing loan (NPL) formation stabilize.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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