KUALA LUMPUR: Financial institutions recorded a loan growth of 5.7% year-on-year (y-o-y) in December 2022, marginally higher than the projected 5.0% to 5.5%, MIDF Research reported today.
On a month-on-month (m-o-m) basis, it was up 0.7%.
In a note released today, the research house said the system loan growth was relatively stable in December after a sharp contraction in November.
“With lending rates having nearly normalised and liquidity no longer as cheap, our 2023 system loan forecast is a muted 4.5% to 5.0%,” it said.
MIDF Research said leading indicators showed a continued downward trajectory with system loan applications continuing to decline, contracting by 12% m-o-m.
It said that contributors to the steep decline were spread out, although prime drivers were hire purchase loans, residential mortgages and working capital loans.
“System loan approvals also saw a steep decline of 18% m-o-m, as approval rates fell to 52% versus 56% in November 2022.
“The rate of loan approval for small and medium enterprises also fell, to 48% in November 2022 compared with 58% in October 2022,” it said.
MIDF Research has maintained its positive call for banking, while top picks for the sector are Public Bank and RHB Bank with a target price (TP) of RM5.39 and RM6.94, respectively.
“Several banking counters have also repriced lower following Bank Negara Malaysia’s (BNM) decision to keep the overnight policy rate (OPR) at 2.75%.
“We view this as an opportunity to accumulate on weakness, as the likelihood of BNM raising OPR by at least 25 basis points (bps) in the first half of 2023 remains intact,” it said.
Meanwhile, Hong Leong Investment Bank (HLIB) said deposits growth in December 2022 was unchanged at 5.9% y-o-y, attributable to current account-saving account moderation being offset by quicker increases in fixed deposits, foreign currency and other deposits.
It noted that as a whole, December 2022’s loan-to-deposit ratio remained flat m-o-m at 86% versus February 2018’s peak of 89%.
“That said, we understand the current rivalry for the fixed deposit is still intense,” it said.
HLIB has maintained its neutral call for the sector and continues to take the stand that the banking sector has a balanced risk-reward profile.
The bank has a “buy” call for RHB Bank and Bank Islam Malaysia Bhd with a TP of RM6.60 and RM3.00, respectively.
Additionally, RHB Research has maintained its overweight call on the sector with CIMB Bank, AmBank and Alliance Bank Malaysia as top picks.
The banking system remained well-capitalised in December 2022 and it has an overweight rating on the sector, RHB Research said.
Source: https://www.freemalaysiatoday.com/category/business/2023/02/02/loan-growth-up-5-7-exceeding-projection/