Maybank IB maintains 'Neutral' on banking sector

  • Analyst Reports
  • Monday, 04 Nov 2019

KUALA LUMPUR: Maybank Investment Bank research no longer expects a cut in Bank Negara's overnight policy rate this year, which should provide a short-term boost to market sentiment in the banking sector.

In its sector update for the month of September, the research house maintained its neutral rating, with buy calls on RHB, AMMB, ABMB and BIMB.

"Positively, CASA and total deposit growth continue to be robust, easing liquidity and funding cost concerns.

"The industry’s gross impaired loans ratio remains stable but there was a pick-up in impaired loans in the mortgage and non-residential property space," it said.

For September 2019, loans growth was 3.8% year-on-year (y-o-y), moderating from 3.9% y-o-y in August 2019.

"While household (HH) loan growth was stable at 4.6% YoY, non-HH loan growth slipped to 2.7% from 2.9%," said Maybank.

On an annualised basis, loan growth ticked up to 3.3% from 2.9% in Aug 2019.

Positively, cumulative bond issuances in 9M19 totalled MYR104bil, up 38% y-o-y, contributing to total industry credit growth of 5.3% y-o-y in September 2019.

Total loan applications on a 3M MA basis contracted for the second consecutive month (-2% y-o-y in Sep 2019).

"This was led by contractions in applications for autos, credit cards and personal loans, with mortgage application growth slipping to just 1.3% y-o-y.

"Working capital loan applications, nevertheless, continue to exhibit positive momentum, rising 19.7% y-o-y in Sept 2019 on a 3M MA basis, after jumping 12.5% y-o-y in Aug 2019 and +1.6% y-o-y in July 2019, after contracting the prior 11 consecutive months from Aug 2018," it said.

Total deposit growth of 4.2% y-o-y outpaced loan growth of 3.8%, further improving system liquidity.

CASA growth continues to outpace deposit growth, expanding 6.5% y-o-y in September 2019, which has led to an overall easing in funding cost pressures.

The industry’s gross impaired loans (GIL) ratio was stable month-on-month (m-o-m) at 1.61% in September 2019.

On an absolute basis, GILs rose RM244mil m-o-m in September 2019, due to higher GILs in mortgages (+RM219m m-o-m) and non-residential property (+RM84mil m-o-m).
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