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KUALA LUMPUR, July 1 (Bernama) -- Kenanga Research has maintained an “overweight” call on the banking sector as May 2022 system loans rose by 5 per cent year-on-year, in line with its 5.0 to 5.5 per cent calendar year 2022 industry growth target.
In a note today, the research house said the 25 basis points (bps) hike in the Overnight Policy Rate (OPR) likely did a number on the industry, as household and business loans saw lower sequential growth with applications coming off in double digits.
“Lumpy applications pre-Hari Raya could also be a dampener to the month. Going forward, we anticipate slower household numbers but expect total industry growth to be lifted by a higher business portfolio as border reopening and a more vibrant economic environment could fuel working capital and expansionary needs,” it shared.
It noted that gross impaired loans (GIL) had returned to 1.64 per cent (+7 bps) but is unconcerned as it is an indication of normalisation of loans profile from the lapse of repayment assistance programmes.
Kenanga also highlighted that Malaysian bank deposits continued to grow by 6.6 per cent year-on-year (yoy) but saw a decline in current account savings account (CASA) mix, possibly from some migration to term-deposits post-rate hike.
The research house also anticipated three additional 25 bps hikes during Bank Negara Malaysia (BNM) meetings in July, September and November as tighter monetary policies may be needed to curb inflationary pressures.
“We maintain our ‘overweight’ call on the sector and lean towards high dividend stocks for shelter amid recession-pulled sentiment.
“Maybank is our favourite pick as the dividend champion (7 to 8 per cent) while Affin is noteworthy for its strengthening fundamentals and possible special dividend payments from the upcoming disposal of its asset management and insurance units,” it added.
Meanwhile, RHB Research also maintained an “overweight” stance on the banking sector as the effect of the surprise 25 bps OPR hike on May 11 was reflected in BNM latest statistics.
The research house noted that fixed deposit rates rose by over 20 bps, while the average lending rate added 12 bps month-on-month to land at 3.68 per cent at end-May.
However, it said loan growth remained stable at five per cent yoy, while deposits rose by 7.8 per cent yoy.
“We tweak our 2022 system loans growth forecast to +5.1 per cent from +5.2 per cent, after factoring in the YTD performance. Our top picks are Hong Leong Bank, AMMB and Maybank,” it shared.
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