KUALA LUMPUR (Oct 19): MIDF Amanah Investment Bank Bhd Equity Research has maintained its "positive" rating on the banking sector and said the new priorities of the 11th Malaysia Plan will provide a boost for the sector.

In a strategy note Oct 18, MIDF Research said the banking sector will play an indirect and supporting role to the new policies providing and/or channelling financing for projects such as infrastructure and construction.

The research house said it expects financing of projects will be based on the merit of the particular project and risk-appetite of individual banks.

"We believe that the banks to benefit the most will be Public Bank Bhd (Buy, TP: RM27.30) and BIMB Holdings Bhd (Buy, TP: RM5.15), as mortgages [are their] current focus.

"For example, housing loans forms 34.7% (RM107.9 billion) and 40.5% (RM17.8 billion) of Public Bank and BIMB's loans book respectively," it said.

However, the research house said affordability could continue to be an issue.

It said this could be due to the lack of a definitive classification of an affordable housing project.

"While we believe that the Rent-to-Own scheme (such as introduced by Malayan Banking Bhd (Buy; TP: RM11.40)) could assist in addressing the issue, it could also provide the banks with potential additional risk as the banks could be saddled with unutilized properties," it said.

The research house said banks with a strong niche in the SME financing segment will also benefit.

"In our opinion, Alliance Bank Malaysia Bhd (Buy, TP: RM4.75) currently fits the bill," it said.

On another note, MIDF Research said it does not believe that banks should be involved in the microfinancing segment due to the higher risk of loan impairments.

"We believe that this should be taken up by Development Financial Institutions (DFIs).

"To further spur accessibility of financing to SMEs, we could foresee a collaboration between banks and DFIs such as syndication and securitisation of SME loans to reduce the risk for banks," it said.

It said Maybank leads the pack in terms of its digital offerings.