PETALING JAYA: The banking sector is on track to see modest loan growth this year based on latest statistics.
Data from Bank Negara showed loan growth for the first three months of the year had averaged at an annualised 5.4%.
That number, said AmInvestment Bank Research (AmInvest Research), was within its 2024 loan-growth forecast of 4%-5%.
“Year-to-date, loans grew by 5.4% annualised, in line with our loan growth expectation of 4%-5% for 2024,” the research house wrote in a report.
Maintaining its “neutral” outlook on the sector, AmInvest Research noted monthly loan growth accelerated to 6% year-on-year (y-o-y) in March, driven by stronger growth in household and non-household loans, compared with 5.8% y-o-y in the preceding month.
“Household loan growth was marginally higher at 6.3% y-o-y in March versus 6.2% y-o-y in February, with sustained growth in mortgage and personal loans. Non-household loan growth in March rose to 5.5% y-o-y versus 5.3% y-o-y in February,” the research house said.
“The improvement was mainly attributed to the stronger pace of financing for the transportation, storage, communication, finance, insurance and business-services sectors,” it added.
AmInvest Research noted that while momentum for loan applications remained slow, March 2024 saw an improvement in approvals of non-household loans.
Movement in overall loan approvals was minus 12.3% y-o-y in March versus 18.6% y-o-y in February.
Meanwhile, AmInvest Research said the overnight policy rate (OPR) would likely be kept unchanged at 3% at the upcoming monetary policy committee meeting on Thursday.
It noted deposits expanded at a faster pace with a pickup in current account and savings account (Casa) growth. Deposit growth climbed to 5% y-o-y in March from 4% y-o-y in February. The loan-deposit ratio for the sector was sustained at 86%.
The sector’s loan-to-fund ratio/loan-to-fund and equity ratio was stable at 81.8% and 71.2%, respectively, in March.
During the month in review, the sector’s liquidity coverage ratio (LCR) slid to 150% in March from 154% in February due to lower LCRs at commercial and Islamic banks. Casa growth increased to 6.6% y-o-y in March from 4.6% y-o-y in February. The banking system’s Casa ratio was stable at 29.7% as of end-March 2024.
Positively, loan impairments and provisions declined in March, the research house noted, pointing to stable gross impaired loan and net impaired at 1.6% and 1.1%, respectively.
The industry’s outstanding impaired loans fell by 0.7% month-on-month (m-o-m) or RM259mil in March.
Total provisions for the sector declined marginally by 1% m-o-m or RM322mil in March. The sector’s loan loss cover (LLC) stood at 92.1% in March 2024. Including regulatory reserves, the LLC was sustained at 120.9%.
AmInvest Research’s “buy” calls were on CIMB Group
Holdings Bhd, with a fair value of RM7.10, Hong Leong Bank Bhd at RM24.10, RHB Bank Bhd at RM6.60 and Alliance Bank Malaysia Bhd at RM4.10.
