CIMB Securities said September banking statistics presented a “mixed picture” as leading loan indicators turned slightly negative while loan growth remained decent.
PETALING JAYA: CIMB Securities has maintained its “overweight” stance on banks with further rerating catalysts being non-interest income bond gains and a possible uplift to loan growth.
In a report to clients, it said September banking statistics presented a “mixed picture” as leading loan indicators turned slightly negative while loan growth remained decent.
“However, asset quality chalked up a strong month-on-month improvement.
“We remain positive on the sector given that there are no major adverse indicators,” the research house told clients.
It said its top picks remained Hong Leong Bank Bhd
, AMMB Holdings Bhd and Malayan Banking Bhd.
In the report, it pointed out that loan applications growth declined 5.3% on a year-on-year basis in September, mainly owing to a slowdown in the household segment. Deposits rose at a slower rate of 3.3% from 3.8% in August.
“This deceleration is mainly attributed to a slowdown in the growth of foreign currency deposits, which account for 10% of total deposits.
“Foreign currency deposit growth tapered off to 4.2% from 8% in August, potentially owing to translation effects from a stronger ringgit.
“Current account and savings account growth improved to 5.2% compared with the August growth rate of 3.8%. Fixed deposit growth picked up to 3.3% from 2.8% in August.”
It also pointed out that gross impaired loans chalked up an improvement of 1.8% or RM610.5mil in September, in contrast with the 0.8% or RM97.1mil month-on-month uptick registered in August.
Consequently, the gross impaired loan ratio was better at 1.54% in September, versus 1.58% a month earlier. “The loan loss cover was relatively stable at 90.8% in September versus 90.5% in August.”
CIMB Securities said main risks for the sector were higher-than-expected cost of funds, outflow of liquidity, and worse-than-expected asset quality.
