KUALA LUMPUR, Dec 6 — CGS-CIMB Research foresees potential expansion in net interest margin and improved loan growth for banks in 2022, arising from expectations of a hike in overnight policy rate and improvement in projected loan growth from 2.5 to 3.5 per cent in 2021 to four to five per cent next year.
The research house estimates a decline in 2021 to 2022 loan loss provisioning, with banks having frontloaded most of their provisions for the credit risks from Covid-19 pandemic since last year.
“Our top picks for the sector are Hong Leong Bank, Public Bank and RHB Bank,” it said in a note today, adding that it maintains its ’overweight’ stance on banks.
It said after hitting a trough of 2.5 per cent year-on-year (y-o-y) at the end of August, the industry’s loan growth continued to recover from 2.9 per cent y-o-y at the end of September to 3.3 per cent y-o-y in October due to the reopening of economy and relaxation in movement restrictions.
“This was largely within our projected loan growth of 2.5 to 3.5 per cent for 2021. Growth for both major loan segments accelerated from 3.2 per cent y-o-y in September to 3.7 per cent y-o-y in October for household loans and from 2.3 per cent y-o-y at end of September to 3.1 per cent y-o-y at end of October for business loans,” it said.
CGS-CIMB said it was encouraged that the industry’s gross impaired loans declined by 2.7 per cent month-on-month (m-o-m) to RM28.7 billion in October although this was contained by the repayment assistance offered by banks to their borrowers.
Similarly, AmInvestment Bank said October 2021 saw a stronger growth of loans in most sectors after reopening of economy except for construction, real estate, finance, insurance, and business services.
“The level of household loan approvals increased but was offset by the decline in non-household loan approvals,” it said.
Furthermore, the research house said total provisions for the sector continued to climb 0.3 per cent m-o-m or RM114 million in October 2021.
“We believe that banks have continued to top up management overlays to be prudent on provisions. We gather that the initial commencement of the Pemulih moratorium on July 2021 saw applications for the financial assistance rising,” it said.
On a comforting note, it said after the initial phase, new enrolments for the Pemulih moratorium have tapered. — Bernama
