KUALA LUMPUR (Dec 2): Analysts continued to be divided towards the prospects of banks, despite better-than-expected third quarter results and improving industry indicators, amid intense competition for deposits which could still hit net interest margin (NIM) in the near term.

Phillip Capital, in its note, raised its 2024 earnings growth forecast to 8%, from 7% previously, citing how top players like Affin Bank Bhd (KL:AFFIN), AMMB Holdings Bhd (KL:AMBANK), CIMB Group Holdings Bhd (KL:CIMB) and RHB Bank Bhd (KL:RHBBANK) beat expectations in 3Q2024.

“Overall, 3Q2024 results came in above expectations,” said Phillip Capital. However, it revised the 2025 growth forecast to 6%, from 7%, partly due to the higher base this year.

RHB also reiterated its “overweight” stance on the sector, citing year-on-year loan growth of 6% in October, with system gross impaired loss ratio (GIL) “nearing the pre-pandemic average”.

Notable "buy" calls from RHB include AMMB (tarrget price/TP: RM6.50), Alliance Bank M Bhd (KL:ABMB) (TP: RM5.50), CIMB (TP: RM9.25), and Hong Leong Bank Bhd (KL:HLBANK) (TP: RM 26.60).

“We maintain our rating on the sector, as we think the stable outlook for Malaysian banks under our coverage provides investors with a defensive shelter,” it said.

Despite the strong 3Q2024, intense competitions within the banks for deposits could pressure NIM, said BIMB Securities, which maintained "neutral" on the financial sector.

However, the research house anticipates better net profits in 4Q2024, “due to window dressing to attract depositors and lower expected credit loss (ECL)”.

Similarly, HLIB Research flagged potential near-term headwinds, including seasonal contraction of NIM due to intensified fixed deposit competition in the fourth quarter.

Despite this, the research firm cited that recent “pull backs are healthy” from its run-up to August, as it presents a buying opportunity for investors, particularly given the upside potential in NIM estimates for 2025, which would bolster banks' earnings.

The research house previously flagged opportunities for banks to reduce their expensive promotional fixed deposit rates, and flexibility to optimise their loan-to-deposit ratio.

“Every 1bp (basis point) expansion in sector NIM, banks’ earnings forecast could be raised by 0.9%,” the research house had said.

“We believe mid-sized banks have better risk-profile”, it said in its latest note, which have two "buy" calls under their coverage, namely, RHB (TP: RM7.30) for its attractive dividend yield, and AMMB (TP: RM 6.15) for its capacity to expand dividend payouts.