Investment Highlights

• Industry loan growth expanded by 6% YoY in Mar 2024 vs. 5.8% YoY in Feb 2024, driven by stronger growth in household and non-household loans. YTD loans grew by 5.4% annualised in line with our loan growth expectation of 4%-5% for 2024. Household loan growth was marginally higher at 6.3% YoY in Mar 2024 vs. 6.2% YoY in Feb 2024 with sustained growth in mortgage and personal loans. Non-household loan growth in Mar 2024 rose to 5.5% YoY vs. 5.3% YoY in Feb 2024. The improvement was mainly attributed to stronger pace of financing to the transportation, storage, communication, finance, insurance and business services sectors.

• OPR expected to remain at 3.0% at the next Monetary Policy Committee (MPC) meeting on 9 May 2024.

• Momentum for loan applications remained slow but Mar 2024 saw an improvement in approvals of non-household loans. Movement in the overall banking system loan approvals was -12.3% YoY in Mar 2024 vs. -18.6% YoY in Feb 2024.

• Deposits expanded at a faster pace with a pickup in CASA growth. Deposit growth climbed to 5% YoY in Mar 2024 from 4% YoY in Feb 2024. LD ratio for the sector was sustained at 86%. The sector’s loan-to-fund ratio/loan-to-fund and equity ratio was stable at 81.8%/71.2% in Mar 2024. Sector LCR slid to 150% in Mar 2024 from 154% in Feb 2024 due to lower LCRs of commercial and Islamic banks. CASA growth increased to 6.6% YoY in Mar 2024 from 4.6% YoY in the preceding month. The banking system’s CASA ratio was stable at 29.7% as of end-Mar 2024.

• Loan impairments and provisions declined in Mar 2024. The industry’s GIL/NIL remained stable at 1.6%/1.1%. The industry’s outstanding impaired loans fell by 0.7% MoM or RM259mil in Mar 2024. Total provisions for the sector declined marginally by 1% MoM or RM322mil in Mar 2024. The sector’s loan loss cover (LLC) slipped to 92.1% in Mar 2024 (Jan 2024: 92.4%), attributed to lower provisions. Including regulatory reserves, LLC was sustained at 120.9%.

• The sector's CET1/Tier 1/Total capital ratios were stable at 14.6%/15.1%/18.3%. Excess capital buffers stood at RM139.5bil.

• Maintain NEUTRAL on the sector with BUYs on CIMB (FV: RM7.10/share), Hong Leong Bank (FV: RM24.10/share), RHB Bank (FV: RM6.60/share) and ABMB (FV: RM4.10/share).

Source: AmInvest Research - 6 May 2024