Retail loan growth likely to remain strong

PETALING JAYA: Despite waning sectoral tailwinds, banking stocks are still regarded as “safe” investments. In the face of potential economic difficulties.

“The banking industry can also aim to boost non-interest revenues. As banking remains a safe sector in the face of a potential economic slump,” it stated.

“However, tailwinds appear to be fading as the sector deals with increasing deposit competition, declining rates on savings and current accounts, sticky staffing and technology costs, more macroeconomic overlays, and new challenges to asset quality in the coming year.”

Meanwhile, Hong Leong Investment Bank (HLIB) Research has lowered its rating to “neutral” on the Malaysian banking industry.

“We become less enthusiastic on the banking industry, despite valuations remaining undemanding.

“There will be fewer rate increases next year, fierce deposit competition, and a softer macroeconomic outlook.”

Additionally, the research firm claimed that the sector is becoming less attractive to investors.

Separately, HLIB Research said that loan growth in the month of October remained constant at 6.5%. Compared to the same period last year, supported by increases in both the household and commercial divisions of 6.3% and 5.5%, respectively.

“Across all household segment sub-segments, there was an increase. In terms of the business segment, working capital financing supported it. Overall, the system loan growth met our 6% to 6.5% full-year 2022 forecasts.

“While home mortgages and hire purchase remain the main drivers, they appear to have moderated a bit from their high.

On the other hand, “unsecured loans scored a remarkable 5% month-over-month gain.”

Credit card loans make up 1.9% of all system loans, according to MIDF Research.

“These increased significantly year over year by 13.6%. Both local and foreign cardholders’ combined purchases in Malaysia showed significant consecutive month growth (3% and 7% month-over-month, respectively).

However, the research firm noted that the percentage of all local card purchases continued to lean more heavily toward foreign cardholders.

According to HLIB Research, asset quality was resilient in October 2022. With the gross impaired loans ratio holding steady month over month at 1.82%.


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