KUALA LUMPUR: Affin Hwang Capital Research is maintaining its underweight outlook on the banking sector with Aeon Credit as its preferred pick.
The research house said on Wednesday the banking system loans grew by +3.9% year-on-year in May but continued to see subdued growth of +0.2% month-on-month (Apr20: +0.1% month-on-month).
Year-to-date, household loans grew by 0.3% while business loans saw a slightly stronger growth rate of 2.0%.
“Consumer demand for big-ticket items was minimal in May, while we saw the trend in business loan applications, approvals and disbursements slowing down on a month-on-month basis, subsequent to the stronger months in March-April (which was also driven by relief funds offered to SMEs), ” it said.
Affin Hwang Capital Research said the Covid-19 pandemic and implementation of the movement-control-order (MCO) since March 18, had caused unprecedented challenges to business activities and shifted the supply-demand dynamics.
“For 2020, we are projecting a 1% year-on-year decline in system loans, due to stronger credit demand from the business segment.
“Meanwhile, we do not discount the possibility of deterioration in asset quality in the domestic banking system, due to potential business closures and rising unemployment, ” it said.