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MIDF maintain positive stance on banking sector
Last update: 01/08/2019

KUALA LUMPUR, Aug 1 (Bernama) -- MIDF Amanah Investment Bank Bhd is cautiously optimistic on the prospect of the banking sector following a spike of 6.3 per cent year-on-year (y-o-y) in loans growth as at June this year.

The bank said the two highest contributors were loans for the purchase of residential property and for personal use which contributed 41.4 per cent (RM42.3 billion) and 23.8 per cent (RM24.3 billion) respectively, to the overall y-o-y loan expansion.

It said loans for residential property grew 7.8 per cent y-o-y to RM581.7 billion while loans for personal use increased 33.8 per cent y-o-y to RM96.1 billion respectively.

“We believed that the surprising loans growth was the result of the strong loans demand in May 2019 while overnight policy rate (OPR) cut have had an impact given that the two highest contributors were retail-based loans,” it said in a research note.

The bank also observed that personal loans grew 51.6 per cent y-o-y to RM67.9 billion from 6.6 per cent y-o-y to RM47.4 billion registered as at the previous month, which indicated that the OPR cut in May this year could have increased the eligibility of potential borrowers, it said.

It also said business loans continued its uptrend as it grew 4 per cent y-o-y to RM773.7 billion as at June this year, however, the loan demand and approval for the month fell of which could be due to festive month.

For deposits, MIDF said the growth remained solid with the total system deposits as at June expanded 7.7 per cent y-o-y led by fixed deposits.

Meanwhile, current account and savings account (CASA) expanded 4.4 per cent y-o-y which appeared that deposits competition remained prevalent in the system, of which FD expansion should be noted came after the OPR cut, it said.

“We maintain loans growth projection for now of 4.7 per cent, although the banking system loans growth caught us by surprise. We believed that it is still early to deduce whether it could sustain until the end of the year,” it said.

However, MIDF said it was cautiously optimistic of the prospect of the banking sector, particularly after seeing the spike in loans growth and believed that this could moderate the issue of net interest margin (NIM) compression.

It said the impact of the OPR cut to NIM will normalise and there are still positives for banks such as the downtrend of expenses and the low credit cost which should be able to alleviate the weakness in income.

“Furthermore, we opine that banking stocks, in general. are currently undervalued given its fundamentals remains intact,” it said. 

It added given the current market conditions, MIDF maintained its positive stance with its top picks for the sector include Maybank with a target price (TP) at  RM11.00, CIMB (TP: RM6.80) and Public Bank (TP: RM27.20).




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100 Yen3.8328/8372
Source: Bank Negara Malaysia

Reduction in the overnight policy rate (OPR) by Bank Negara Malaysia would be good for consumer spending and investment;
Not sure
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