MIDF projects 5% YoY loan growth in banking sector this year


MIDF Amanah Investment Bank Bhd foresees a 5% year-on-year (YoY) loan growth this year for the banking sector driven by accelerated loan demand.

Last year, the loan growth averaged at 4.01%.

The investment bank said besides consumer loans, businesses are expected to drive loan growth to fund the expected increase in business activities this year.

“Our optimism is premised on economic recovery, made more certain with the availability of vaccine in the second half of 2021, expecting credit cost to start normalising while income will stage a rebound, especially as our economics team opine of a potential rate hike in the final quarter of the year,” it said in a research note yesterday.

MIDF maintains a “positive” view on the banking sector as it expects earnings to improve.

Nevertheless, it has also identified short-term pressure that banks would have to overcome, especially potential stress on asset quality.

“However, we hope banks in general will be able to weather it, particularly in the case for banks with large loan loss reserves or have been resilient during the current challenging environment,” it said.

In a separate note, CGS-CIMB Securities Sdn Bhd projected loan growth in the sector to be between 4% and 5% in 2021 supported by a GDP growth projection of 7.5%.

“However, we see downside risk to our 2021 loan growth projection as the MCO (Movement Control Order) 2.0 could crimp 2021 GDP growth and business activities,” it said.

The stockbroking reiterates its ‘Overweight’ call for the banking sector as it expects a recovery in banks’ net profit growth to 19% in 2021 although the growth rate could be lower due to MCO 2.0 and the spike in Covid-19 cases.

Meanwhile, Kenanga Investment Bank Bhd sees further weakness in the market as investors scrutinise updates on movement controls and Covid-19 cases, which could cause better buying opportunities to emerge.

“At present, we are not overly concerned as our recent industry checks have indicated that the previously allocated target assistance exposure for certain banks is still sufficient in the current economic climate with household loan applications still healthy,” it said.

It said the bottom 40% income group segment only made up a low-to-mid teens proportion of certain banks’ overall retail loans.

Maybank Investment Bank Bhd in a separate note maintains its 2021 loan growth forecast of 3.8% premised on faster economic expansion and decent demand for mortgage and auto financing.

AmInvestment Bank Bhd said it expects the Overnight Policy Rate to remain unchanged at 1.75% with some downside risk if the MCO is extended beyond Feb 4 with stricter restrictions.

“We believe that all eyes wil be on the weeks before the next Monetary Policy Committee meet- ing on March 4 for any signs of pickups in economic growth,” it added.