Banking Sector: Modest income growth with stable asset quality Overweight

We continue to be OVERWEIGHT on the banking sector in 2019. We expect the sector's core earnings to grow by 4.6% in 2019 (2018: 6.5%), underpinned by a modest growth of 3.6% in total income, supported by higher NII from loan expansion. Meanwhile, NOII is projected to be flat with controlled growth in operating expenses and stable credit cost. We do not expect significant rises in provisions for loan impairments.

For 2019, we expect loans for the Malaysian banking industry to grow by 4.0–5.0% premised on a slower GDP expansion of 4.5-4.8%. This will be close to 2018’s expectation of 5.0% growth on the back of a projected increase in GDP by 4.8–5.0%. Household and non-household loan growth is expected to moderate slightly in 2019. Capital investment spending in services and manufacturing and private consumption will drive economic growth in 2019.

Others:

Sapura Energy: RM760mil new wins underpin improved prospects Buy

RETAIL RESEARCH

Stocks On Radar: AirAsia, Astro Malaysia, SKP Resources, WCT Holdings

NEWS HIGHLIGHTS

Malaysian Economy: M'sian corporates, SMEs cautious as business confidence weakens

Lion Industries: Sells non-core asset to fund flat steel venture

IPO: Pelita mulls listing on Bursa Malaysia

US Stock Exchange: Major Wall Street players plan exchange to challenge NYSE, Nasdaq

Source: AmInvest Research - 8 Jan 2019