KUALA LUMPUR, Jan 2 — Investment analysts have maintained a positive stance on Malaysia’s banking sector for 2024.
In a research note today, Kenanga Investment Bank Bhd kept its “overweight” call on the sector with the loan growth projection in a range of between 4.5 per cent and 5.0 per cent in the year.
The bank said this was a tad higher than its 2023 assumption of four per cent to 4.5 per cent, premised upon a greener economic landscape.
It said the banking sector’s resilience would continue to be relevant to investors, especially with more prominent recessionary concerns seen in key regional markets.
“Domestically, we see asset quality controls remaining tight, governed by Bank Negara Malaysia’s strict requirements and prudent management by the banks, which still maintain some level of management overlays.
“Liquidity is expected to be sufficient as the focus on building their respective loans book and deposits book appear to be equal.
“At current price points, banking dividend yields still lead with six per cent to seven per cent possibly being offered.”
Kenanga also opined that the overnight policy rates could remain stable at three per cent throughout 2024, which may lead to more optimised product rates for consumers, but also as a measure to keep inflation in check.
Meanwhile, it pointed out that with its April 2024 deadline looming, most digital banks are expected to be launched soon, with GX Bank Bhd being the first to enter the market.
“For now, we do not anticipate meaningful pressures from here to traditional banks, albeit they will likely capture the attention of consumers with its high-yielding deposit structure,” it shared.
In a separate research note, MIDF Research has maintained its “positive” stance on the banking sector with the view that valuations and dividend outlook are strong and that upside rerating drivers should provide a boost to sector valuations, especially since the worst seems over for now.
MIDF said it saw a good recovery in loan growth, with a strong uplift from a sluggish couple of months, increasing by 4.9 per cent year-on-year and 0.8 per cent month-on-month.
It said asset quality would also continue to be maintained well with notable m-o-m improvements in the construction sector and working capital.
The research house also stated that leading indicators were more normalised following an excellent couple of months.
It said fixed deposit rates were flattish, deposit growth was slow and non-retail balances were stronger, offsetting heavy government withdrawals.
“With most major headwinds in the past, we are currently looking to multiple upside possibilities.
“Following the indication that asset quality and net interest margin (NIM) concerns were exaggerated, we think the sector remains attractive for its valuations.
“We do urge investors to be more selective with their picks, as not all banks have optimal outlooks.”
Meanwhile, Hong Leong Investment Bank Bhd has retained a “neutral” call for the banking sector as it viewed that the risk-reward now is more balanced, with no new positive catalysts to spur share prices significantly higher.
The bank said the sector’s profit in 2024 and 2025 was projected to grow at a slower rate of four per cent to five per cent as against 14 per cent in 2023.
It said this projected growth also lagged the broader market, with the FTSE Bursa Malaysia KLCI being seen to rise at a quicker eight per cent in 2024.
“This is no thanks to NIM being unable to recover meaningfully, slower non-interest income growth, and no net credit cost write-backs.
“Regardless, valuations are not excessive, and hence, we feel it is too premature to turn full-on bearish,” it added.
— Bernama
