Fitch Ratings expects Malaysian banks to offer higher rates on longer-term deposits to further move away from short-term funding.
PETALING JAYA:Some positive trends are emerging in the banking sector, one of which is that bank deposits have crossed the 4% mark after languishing for more than 21 months.
Maybank IB Research analyst Desmond Ch’ng said deposits growth, which had been below 4% for over 21 months, finally broke through the 4% barrier to 4.3% year-on-year in July and increased further to 5.0% in August.
He noted that current and savings account (CASA) growth had sustained a fast pace of 9.5% y-o-y in August versus 9.7% in July.
“By deposit holder, business and retail deposits saw faster growth momentum of 8.8% y-o-y and 4.2% y-o-y while having contracted over the past 12 consecutive months,
“Government deposit growth finally turned positive (+8.4% y-o-y) in July and expanded at a faster pace of 12.7% y-o-y in August,’’ he said.
Meanwhile, Maybank IB in a research report said other positive trends include a pick-up in both household (HH) and non-HH loan growth in August, while loan applications and approvals also expanded y-o-y during the month.
The research house is maintaining its neutral stance on the sector and loan growth of forecasts of 4.7% for this year.
Loan growth picked up pace in August, rising 5.8% y-o-y versus 5.6% y-oy in July, with HH loan growth stable at 5% and non-HH loan growth improving
to 6.8% y-oy from 6.3% in July.
Annualised loan growth was a higher 3.5% in August (3.1% in July) with HH loan growth improving to 4.1% (3.9% in July) and non-HH loans rising 2.8% (2.2% in July).
On a 3-month moving average (3M MA), loan applications expanded 4.0% y-o-y in August, keeping pace with the 4.2% YoY growth in July.
Loan approvals, meanwhile, also picked up pace, rising 14.8% y-o-y in August, this being the 6th consecutive month of positive growth, and a faster pace compared to 10.7% y-o-y in July.
What is less encouraging is that, the research house added was that working capital loan applications contracted for the 14th consecutive month on a 3M MA basis, declining 11% y-o-y in August.
Working capital loan approvals on a 3M MA basis improved slightly to +3.2% in August versus a 1% contraction in July.
Following the banking industry’s loan growth increase of 5.8% year-on-year in August, analysts see the possibility of a strong fourth quarter where loan disbursements could ramp up.
According to Affin Hwang Capital Research, the banking system’s loan disbursement in August came in higher at 9.7% month-on-month (m-o-m) versus a decline of 5.4% m-o-m in the previous month.
Key sectors driving loan growth were households, retail and trade, construction, real-estate and transportation.
But while it foresees a downside risk to its 6% loan growth target for 2017, the fourth quarter may potentially see more robust demand, the research house said.
The research, which has an “overweight” call on the sector, foresees sector-earnings growth of 10.5% year-on-year (y-o-y) in 2017, followed by a more modest 4.4% y-o-y in 2018 and 3.8% y-o-y in 2019.
Valuation-wise, Affin Hwang Capital is of the opinion that the sector’s overall valuation in 2017 still appears attractive at a 1.33 times price to book value multiple on a forward basis against the past 10-year average of 1.6 times and the past five-year average of 1.5 times.
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