Loan growth in December 2022 recorded an increase of 5.7 per cent year-on-year (y-o-y), slightly higher than the projected 5.0-5.5 per cent, said MIDF Research.
It was a 0.7 per cent growth on a month-on-month (m-o-m) basis.
In a note today, the research house said December’s system loan growth was relatively stable, following a sharp contraction in the previous month.
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 per cent,” it said.
MIDF Research said leading indicators showed a continued downward trajectory with system loan applications continuing to decline, contracting by 12 per cent 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 per cent m-o-m, as approval rates fell to 52 per cent versus 56 per cent in November 2022.
“Small and medium enterprises approval rates also fell to 48 per cent in November 2022 compared to 58 per cent in October 2022,” it said.
MIDF Research has maintained its positive call for the banking sector, 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 per cent.
“We view this as an opportunity to accumulate on weakness, as the likelihood of BNM raising OPR by at least 25 basis points in the first half of 2023 remains intact,” it said.
Meanwhile, Hong Leong Investment Bank (HLIB) in its note said deposits growth in December 2022 was unchanged at 5.9 per cent y-o-y, attributable to current account-saving account moderation being offset by quicker increases at 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 per cent versus February 2018’s peak of 89 per cent.
“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 believe 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 the top picks.
The banking system remained well-capitalised in December 2022 and it has an overweight rating on the sector, RHB Research said.