With the banking sector releasing its somewhat steady Q3 results, Kenanga Investment has published its October banking performance overview, giving the sector a ‘stable showing’ assessment.
According to the investment house, the October system loans increased by 4.0%, within its 4.0%-4.5% target with expectations of some pick-up during the year-end. A continued inflow of housing loans could be attributed to greater demand for affordable homes while businesses may front load on working capital to meet year-end seasonal activities. Meanwhile, industry gross impaired loans (GIL) appear stable at 1.70%.
Deposits still grew with a slight nudge to CASA levels, likely due to the expiry of long-dated fixed deposits from CY22. However, this may shrink further during the banks’ year-end bid to capture more liquidity and offer attractive product rates amidst muted interest rate prospects. Kenanga anticipates OPR to maintain at 3.00% till end-CY24, which could allow the banks plenty of room to re-optimise their product margins.
All in all, the house maintains an OVERWEIGHT call on the sector, with a continued emphasis on tactical picks as investors may be selective with regards to balancing long-term fundamental strength and near-term sentiment upliftment. Kenanga also feature names such as: CIMB for its earnings trajectory which may outpace its peers in addition to better dividend prospects, AMBANK for rising consolidation prospects fuelled by its more palatable book performance, and ABMB as a small- cap favourite given its largely comparable fundamentals which beat certain large caps. Its high exposure to SMEs could also translate to better-than-expected growth during an economic upturn.
