PETALING JAYA: There is likely to be a short-term boost in market sentiment on the banking sector, as Bank Negara is expected to retain its overnight policy rate.
Analysts and research houses remained optimistic on the sector and have “buy” calls on most banking counters.
In its review on the banking sector for September, Maybank IB Research said current accounts and savings accounts (CASA) and total deposit growth continue to be robust, easing liquidity and funding cost concerns.
Total deposit growth of 4.3% year-on-year (y-o-y) outpaced loan growth and this helped to further improve system liquidity.
CASA growth, on the other hand, outpaced deposit growth at 6.5% y-o-y.
The industry’s gross impaired loans ratio remains stable month-on-month (m-o-m) at 1.61%, but the research house noted that there was a pick-up in impaired loans in the mortgage and non-residential property space.Loan growth stood at 3.8% y-o-y last month, a slight dip from 3.9% y-o-y the previous month.
“While household loan growth was stable at 4.6% y-o-y, non-household loan growth slipped to 2.7% from 2.9%. On an annualised basis, loan growth ticked up to 3.3% from 2.9% in August 2019.
“Positively, cumulative bond issuances in the nine months of 2019 totaled RM104bil, up 38% y-o-y, contributing to the total industry credit growth of 5.3% y-o-y in September 2019, ” it said in its research report yesterday.
The research house has maintained a neutral stance on the banking sector and has buy calls on RHB Bank Bhd, AMMB HOLDINGS BHD, Hong Leong Financial Group Bhd, Alliance Bank Malaysia Bhd and Bank Islam Malaysia Bhd.
Kenanga Research said loans remained soft in September, but showed improvement on a quarter-on-quarter and annualised basis.
The research house added that the accommodative interest rates seemed to be gaining traction for households and it expects further credit demand form the segment in the months ahead.
“Supporting the demand are the resilient approval rates in the system, which are three percentage points higher than its four-year average.
“At the current m-o-m pace, we expect loan growth in the system to the end of the year to stand at around 5% y-o-y, ” it said, adding that it has retained its overweight call on the sector as valuations are attractive.
Most banks under Kenanga’s coverage are rated “outperform”, except for HONG LEONG BANK BHD with a “market perform” rating.
Did you find this article insightful?