KUALA LUMPUR (Oct 1): The latest banking data released by Bank Negara Malaysia was not exciting enough for banking analysts to consider the outlook as being too rosy, with Kenanga IB Research, AffinHwang Capital Research and Hong Leong Investment Bank Research (HLIB) maintaining Neutral stance on the banking sector.
In a note today, Kenanga opined that banking data for August 2014 was positive, with the deceleration trend of loans growth coming to a halt, when it recorded a 8.6% growth year on year(y-o-y) in Aug, which remained unchanged from July’s y-o-y growth of 8.6%.
“Both business and household loan showed signs of resiliency, growing at 8.1% and 9.1% y-o-y respectively. Although current industry loan growth is slightly below our expectation of 9-10% y-o-y for 2014, we are keeping it for now,” said Kenanga in its report today.
Kenanga added that total loan applications for August was encouraging when it expanded 9.4% y-o-y, due to stronger demand from the business segment, and total loan approvals also improved albeit at a slower pace, at 5.9% y-o-y.
However, the research house said that these positives were one-off and to be short-lived in nature as private consumption in the near term is seen to be lethargic causing slowdown in overall lending activities.
AffinHwang said that its neutral rating on the sector was due to a lack of re-rating catalysts in the second half of 2014 (2H14), on the back of weaker trading and investment gains potential, moderating loans growth and a tighter liquidity situation.
“Nonetheless, the drive for further consolidation within the sector could bring excitement and drive valuations higher,” said AffinHwang, adding that its top stock picks in the sector included Hong Leong Bank Bhd, Alliance Financial Group Bhd and Malayan Banking Bhd (Maybank).
Meanwhile, HLIB said that the banking deposits y-o-y growth decelerated as it contracted month-on month (m-o-m), resulting in higher loan-to-deposit ratio and lower excess liquidity of RM284billion.
The research house added that although the higher average lending rate is positive towards net interest margins (NIM),it is temporary due to liabilities re-pricing catching up and intense competition, especially for deposits in recent months.
“We expect overnight policy rate to help sustain rather than boost NIM, moreover contraction in deposits will intensify competition, putting pressure on NIM,” said HLIB in its report.
At 11.47am, Hong Leong Financial Group shares rose 16 sen or 0.91%, and was one of the top gainers of the exchange
Other banking stocks which were on an upward trend at 11.47 am this morning were Maybank which went up by 3 sen, or 0.30% to RM9.99 and CIMB Group Holdings Bhd which was up 2 sen, or 0.28% to RM7.05.