AmBank Research retains ‘Overweight’ call on banking sector

AMBANK Research retains ‘Overweight’ stance on the banking sector, recommending top buy for RHB Bank Bhd (fair value [FV] RM7.40/share), CIMB Group Holdings Bhd (FV RM6.60/share) and Malayan Banking Bhd (FV RM10.30/share).

“Our earnings estimate for banks has taken into account another 100 basis points (bps) increase in Overnight Policy Rate in the second half of 2022 (2H22) and 2023. This is in addition to the 25bps rate hike announced on May 11, 2022,” the firm said in a research note today.

According to AmBank Research, the industry loan growth was sustained at 5% YoY in May 2022.

However, a higher household loan growth of 5% YoY was offset by a slightly slower non-household loan of 4.9% YoY.

Lending for working capital loans slowed down in May 2022. Year to date, the industry’s annualised loans have grown by 4.7%.

It also added that asset quality for the banking sector remains stable despite continued upticks in impaired loans as borrowers continue to exit loan repayment programmes leading to the tapering of the percentages of loans under repayment assistance. The sector gross impaired loan ratio was 1.6%, while the NIL ratio stood at 1%.

“With the acceleration of US Federal Reserve rate hikes towards 3.5% by end-2022, we have seen a more stable 10-year Malaysian Government Securities at 4.2%,” it added. — TMR / pic by Muhd Amin Naharul