KUALA LUMPUR, Nov 1 — AmInvestment Bank Research has maintained its "overweight” call on the local banking sector as the loan growth had picked up pace after lockdown.

In a research note today, it said the call was based on an industry loan growth, which rose to 2.9 per cent year-on-year (y-o-y) in September 2021, contributed by stronger growth of working capital loans for businesses.

Household loan growth, meanwhile, moderated further to 3.2 per cent y-o-y in September 2021, while non-household loan growth climbed to 2.6 per cent y-o-y with a stronger pace of working capital loans.

"We retain our overweight stance on the sector with our top buys on RHB Bank with a fair value (FV) of RM6.80 per share, Maybank (FV RM9.90/share) and CIMB Group (FV RM5.80/share). 

"On Alliance Bank, we roll forward our valuation to financial year 2023 and raise our FV to RM3.60 per share from RM2.90,” it said.

The research firm expects no change to overnight policy rate (OPR) at 1.75 per cent in the upcoming Monetary Policy Committee meeting on Wednesday.

"We continued to expect the OPR to be sustained at 1.75 per cent for the rest of 2021 with the likelihood of a rate hike of 25 basis points (bps) in second half of 2022,” it said.

On the average impact to banks from the one-off imposition of "Cukai Makmur” (Prosperity Act) as announced in Budget 2022, the research firm said as it is only a one-time tax rate hike and it expects investors to eventually turn their attention to the improving fundamentals of banks (recovery plays) which will benefit from a stronger economic growth.

"We continue to see prospects of improving total income supported by a pick-up in loans growth and potential interest rate hikes benefiting banks’ net interest margins.

"Additionally, banks’ asset quality is anticipated to improve ahead, hence, requiring lower provisions,” it added. — Bernama