Banking still ‘overweight’ despite declining loan growth: AmInvestment

PETALING JAYA: AmInvestment Bank Research maintained an ‘overweight’ call on the banking sector despite industry loan growth declining by 4.4% year on year, due to slower non-household loan growth.

Non-household loan growth decelerated to 4.4% year on year in March 2018, from 4.5% year on year in February, while growth in household loans remains stable.

On a year-to-date basis, industry loan growth was an annualised 4.8% and remains on track to meet the research house projection for 5% loan growth in 2018 on the back of gross domestic product growth of 5.5%.

Meanwhile, growth in household loan applications slipped further to 8.1% year on year.

“The industry’s impaired loans continued to rise for the third consecutive month. It increased by 1.8% month-on-month or RM441 million in March 2018, due to upticks in impairment of loans for purchase of residential and nonresidential property, construction and working capital loans,” the research house said.

This was due to the refining of bank’s methodologies for the implementation of MFRS 9 which resulted in an increase in provisions. Notwithstanding that, the industry’s total gross impaired loans remained steady at 1.6% while the net impaired loan ratio continued to inch up to 0.99% from 0.94% and 0.91% in February and January 2018 respectively, it added.

AmInvestment Bank recommended a ‘buy’ on RHB Bank (FV: RM6.30/share), Public Bank (FV: RM24.30/share), Alliance Bank Malaysia (FV: RM4.40/share) and BIMB Holdings (FV: RM4.80/ share).