Banking industry loan growth to range between 5.5 to 6.0 pct in 2024

KUALA LUMPUR: The banking industry’s loan growth is expected to range between 5.5 to 6.0 per cent in 2024 compared to 2023’s 5.3 per cent, outpacing its gross domestic product (GDP) forecast of 4.5 per cent to 5.0 per cent, said Kenanga Research.

The research house added that its “in-house GDP expectation for 2024 stands at 4.7 per cent which seems to fall behind our projected system loan growth target.” It noted that the January 2024 loan growth increment of 5.7 per cent could have been frontloaded due to the February Chinese New Year festivities.

“The widening disparity is attributed to sustained mortgages stacked up from prior building of loans books, though we expect a stronger emphasis on business loans in the near-term.

“Housing transactions are possibly skewing towards affordable homes as opposed to higher value sub-sale transactions,” it said, adding that a persistently soft ringgit would likely leave a mixed impact on net importing or net exporting businesses.

As such, Kenanga Research suspects the largest support would come from construction and infrastructure projects progressing well.

With loan growth intact, net interest margin (NIM) pressures are expected to ease and with credit costs not a major concern, the research house reckons that investors may further flock into the sector, particularly into large caps with sustainable yields.

On the overnight policy rate (OPR), Kenanga Research said it continues to expect OPR to be steady at 3.00 per cent throughout 2024 with a greater downside bias should Bank Negara Malaysia (BNM) opt for an adjustment.

It has maintained an “overweight” call on the banking sector as market tailwinds are expected to continue outweighing industry headwinds, which may lead to fewer tests of the sector’s resiliency.

For the second quarter of 2024, Kenanga Research has rated “outperform” calls on Public Bank, RHB Bank and Alliance Bank Malaysia Bhd as its top picks with target prices of RM5.10, RM7.25 and RM4.30, respectively.

However, it downgraded Bank Islam Malaysia Bhd to “underperform” from “market perform” with a target price of RM2.25. — Bernama