KUALA LUMPUR, Feb 3 — AmBank Research is retaining its banking sector’s loan growth projection for 2020 at four per cent against an estimated gross domestic product (GDP) growth of 4.6 per cent.
It is also maintaining an overweight call on the sector as valuation and dividend yields of banks remain compelling.
In a sector report today, the research house said its top stock picks are Maybank with a fair value (FV) of RM9.70 per share, RHB Bank (FV: RM6.50 per share) and Hong Leong Bank (FV: RM18.90 per share).
At noon-break, Maybank and Hong Leong Bank dropped one sen each to RM8.42 and RM15.90 respectively, while RHB Bank was flat at RM5.69.
AmBank Research noted that industry loan growth grew 3.9 per cent year-on-year (y-o-y) in December 2019, which was slightly lower than its expectation of a four to five per cent growth for 2019.
The improvement was contributed by a stronger non-household loan growth of 2.7 per cent y-o-y, while the household loan growth remained stable at 4.7 per cent y-o-y.
Meanwhile, disbursements for non-household loans outpaced repayments in December 2019.
AmBank Research said December 2019 also saw a stronger growth in loan applications from households, while approvals for both household and non-household loans picked up pace.
Meanwhile, outstanding impaired loans in December 2019 fell by 4.6 per cent or RM1.29 billion month-on-month (m-o-m), largely driven by lower impairment of loans for purchase of transport vehicles, personal, construction and working capital loans.
Nonetheless, total gross impaired loan ratio (GIL) fell slightly to 1.5 per cent while net impaired loan (NIL) ratio was reduced to 0.96 per cent from 1.02 per cent in the previous month, the research house said.
Total provisions for the sector fell by 4.4 per cent or RM1.1 billion m-o-m.
In total, industry deposits grew 2.9 per cent y-o-y in December compared to 2.6 per cent y-o-y in the previous month.
AmBank Research said the sector’s weighted base rate and average lending rate were stable at 3.68 per cent and 5.16 per cent, respectively, while base lending rate remained at 6.71 per cent.
In addition, current account saving account (CASA) growth expanded to 6.7 per cent y-o-y in December 2019 from 5.5 per cent y-o-y in November 2019, resulting in a higher CASA ratio of 26.5 per cent.
As for bond and sukuk issuances, it said year-to-date, net funds raised in the market by the private sector were RM45.7 billion, a decline of 6.8 per cent y-o-y.
December 2019 saw higher new issuance for bonds and sukuks while equity capital market activities continued to be soft.
Nevertheless, these were offset by a rise in the redemptions of bonds and sukuks in the last month of 2019, AmBank Research said.
Meanwhile, 10-year Malaysian Government Securities yield slipped by 11.6 basis points m-o-m. — Bernama
