The Malaysian banking sector exhibited significant growth in June 2024, with positive trends in loan growth and deposit expansion, according to reports by most brokinng houses.
Maybank, MIDF, and Kenanga all maintained a positive stance on the banking sector, highlighting robust loan growth and improvements in asset quality.
Maybank was particularly optimistic about the continued upward trajectory in loans and CASA growth, maintaining a positive view on the sector with BUY ratings on AMMB, CIMB, Alliance Bank, Public Bank, HL Bank, and HLFG.
MIDF also upheld a positive call, emphasising the resilient fundamental outlook and significant pickup in business loans.
Kenanga reiterated an OVERWEIGHT rating, citing strong sequential business loan growth and steady deposit readings, while RHB maintained a NEUTRAL call but favoured banks with strong capital management themes, such as CIMB and AMMB.
Loan growth in the banking sector was driven by a surge in business loans and stable household loan growth. Maybank reported a faster 6.4% YoY growth in industry loans, with non-household loans expanding at a notable pace. MIDF highlighted a significant pickup in business loans, which grew by 4.9% YoY and 1.2% MoM, while Kenanga noted that business loans showed stronger numbers post-festive seasonality.
RHB also observed an acceleration in business loan growth to 6.4% YoY, aligning with the system trend.
Deposit growth remained steady across the board, with CASA expanding faster than overall deposits. Maybank reported a 4.7% YoY growth in deposits, with CASA growing at 6.5% YoY. MIDF noted a slight contraction in deposits MoM but highlighted a 6.5% YoY growth in CASA. Kenanga observed that system deposits grew by 4.9% YoY, while RHB reported a 5% YoY growth in system deposits, indicating a tighter loan-to-deposit ratio.
Asset quality improved with a decline in impaired loans and a stable gross impaired loans (GIL) ratio. Maybank noted a decline in absolute impaired loans by 3.2% YoY and a GIL ratio trending towards pre-COVID levels. MIDF and Kenanga reported similar improvements in GIL ratios, with Kenanga noting an industry GIL ratio of 1.60%. RHB also highlighted improvements in system GIL and household GIL, reflecting stable asset quality.
The banking sector showed resilience against potential headwinds, with steady interest spreads and strong capital ratios. Maybank highlighted encouraging trends in loan growth and deposit expansion, supporting positive margins for banks.
MIDF and Kenanga noted stable leading indicators and modest deposit growth, with Kenanga expecting the sector to remain resilient despite inflationary pressures. RHB observed stable capital ratios and a flat net interest margin (NIM) in 2Q24, indicating sound financial health.
The Malaysian banking sector demonstrated robust growth potential in June 2024, supported by strong loan and deposit growth, improved asset quality, and stable financial metrics. Investors are encouraged to consider banks with strong fundamentals and favourable capital management themes, such as CIMB and AMMB, as highlighted by the investment banks.