PETALING JAYA: Rising loan growth, stabilising net interest margins, the potential for higher non-interest income and healthy capital and liquidity buffers are some of the key reasons why analysts are maintaining their “overweight” call on the banking sector.
TA Research said in a report it was maintaining its 2024 loan-growth forecast at 6.1%, underpinned by consumer and business loan growth of 6.3% and 5.9%, respectively, adding that it reiterated its “overweight” call on the sector.
However, the research house warned of potential downside risks, including declining asset quality due to concerns over rising inflationary pressures amid ongoing subsidy rationalisation, persistent external shocks, weaker contributions from overseas operations and consistently high overhead expenses.
“Despite these risks, the sector’s outlook remains positive, supported by solid performance indicators and growth prospects,” TA Research said.
The research house also said that total loans and advances grew at a softer pace of 5.6% in September compared with a month earlier.
By segment, consumer loans expanded by 6.4%, while business loans eased to grow by 4.5% versus an increase of 5.2% in August.
Nevertheless, overall loan growth expanded by 3.4% year-to-date, versus 3.1% in September 2023.
It said activity in the capital market remained healthy in the first nine months of 2024, with net funds raised by the private sector through new shares and debt-security issuance amounting to RM94.2bil.
Total loan applications declined by 4.9% on a year-on-year basis. Consumer loan applications contracted by 9% while business loan applications slipped by 0.4%.
By segment, consumer-impaired loans decreased by 4% while impaired business loans fell by 5.8%.
The ratio of net impaired loans to total gross loans for the sector stood at 1.5%, improving from 1.7% a year ago, the research house noted.
It said compared with September 2023, the gross impaired loan (GIL) ratio for residential, non-residential loans and credit cards strengthened by 20 basis points (bps), 10 bps and 20 bps to 1.2%, 1.6% and 0.8%, respectively.
The GIL ratio for hire purchase loans was steady at 0.5%.
“Elsewhere, the GIL ratio for some major business segments, such as manufacturing, improved by 1.7%, while construction’s GIL was steady at 4.8%. Wholesale, retail and trade deteriorated by 10 bps to 2.2%,” the research house added.
