Analysts stay bullish on banks

Analysts stay bullish on banks

KUALA LUMPUR: Cukai Makmur notwithstanding, analysts remain bullish on the banking sector as September banking system data continues to point towards an economic recovery.

In a note, Maybank Investment Bank Research said it remains positive on banks as the pace of contraction in working capital loan applications is slowing and looks set to turn the corner.

"With the gradual opening up of the economy, we expect loan growth to strengthen in the coming months and maintain our industry loan growth forecast of 3.8% (annualized 3.4% end-Sep 2021)," it said.

It added that the one-off Cukai Makmur is expected to dampen banks' earnings in FY22 but a possible offset could be lower-than-expected provisions.

Meanwhile, RHB Research said the healthy uptick in system loans in September, which offsets the month-on-month contraction in August, points to a sequentially stronger loan growth for 3Q21, albeit modest.

It said net interest margin will likely be stable given the still-healthy CASA growth and unchanged policy rate while asset quality will remain steady due to the various relief assistance provided by banks.

"Banks remain the best proxy for the economic recovery and rate hike cycle, while the impact of the National People’s Wellbeing and Economic Recovery (Pemulih) moratorium is expected to be manageable, given the very targeted scope," said RHB, which maintained its "overweight" call.

The research firm noted that system loans in September rebounded 1% m-o-m, helped by the phased relaxation of lockdown measures.

The rebound was led by working capital loans, mortgages and loans for purchase of securities.

Reflecting the pick-up in economic activities, lending to the non-household segment rose 1.5% MoM, outpacing the 1.0% MoM increase in household loans, added the brokerage.

System loan applications on a three-month moving average basis was up 2.6% m-o-m after falling 6% m-o-m in August.

Applications from the household segment increased 5.2% m-o-m, while demand from the business segment dipped a modest 0.8% m-o-m.

On a monthly basis, the growth in loan applications was sustained at 12% m-o-m, boosted mainly by the household segment.

In other September data, system deposits grew 1.4% m-o-m although current account savings account (Casa) growth momentum continued to moderate to 11.3% year-on-year.

System GILs declined 5.1% m-o-m mainly due to a sharp drop in working capital GILs while construciton and auto GILs fells m-o-m. The system GIL ratio ticked down to 1.57%.

SME financing grew 0.6% m-o-m in August with a broad-based improvement across manufacturing, wholesale and retail and construction being the key drivers.

https://www.thestar.com.my/business/business-news/2021/11/02/analysts-stay-bullish-on-banks