KUALA LUMPUR: CIMB Equities Research said the conducive environment for the banking sector, following the review of the banking statistics for October, had led it to reaffirm its Overweight stance.

The research house said on Thursday, Dec 2 that it is unwavering in its positive stance on Malaysian banks. The stronger-than-expected loan growth of 12.4% yoy in Oct 10 and stable net impaired loan ratio of 2% underpin the buoyant outlook.

"For 2010, we are projecting strong loan growth of 11.5-12.5%. Although we anticipate an increase in the gross NPL ratio to 3.7-3.8% by year-end, this is the result of technical adjustments for the adoption of FRS 139, which has minimal impact on banks' earnings.

"Given the favourable landscape, we maintain our Overweight stance on the sector," it said.

CIMB Research said factors that could catalyse the sector include (1) strong earnings growth, (2) higher investment banking income, (3) better growth prospects for overseas operations, (4) potential GP write-backs, and (5) upside potential for dividend forecasts.