KUCHING: Corporate loans will likely be the driver of the banking sector in 2012 on the back of the infrastructure projects under the Economic Transformation Programme (ETP).
“Loans grew at 11.9 per cent year-on-year (y-o-y) in February 2012, which was within our full-year target of a 11 per cent to 13 per cent growth for 2012,” Kenanga Investment Bank Bhd (Kenanga Research) said in its research report.
It noted that both household and business loans were steady and stable in February, upped by 12.13 per cent and 11.7 per cent respectively while consumer loan growth was driven by robust growth in mortgages which saw a 17.7 per cent growth y-o-y.
The research house noted, however, that the strong performance was offset by a slower auto loans while the steady growth in business loans at 11.7 per cent growth was due mainly to a seasonal pattern.
“February’s loan leading indicators has recovered from January’s low. Loans application turned positively up by 47.3 per cent y-o-y in February 2012 as loan approved improved significantly by 17.7 per cent,” the report further stated.
Kenanga Research opined that the January and February data could be influenced by some elements of seasonal factors. It went on to note that the data was not strong enough to support the consensus view of a potential slowdown in loans growth due to ‘Responsible Finance’ guidelines issued by Bank Negara Malaysia.
It added that while originally believing that the introduction of more of such policies might reduce the growth momentum in the retail segment, however, at this juncture mortgages and hire purchase continued to grow healthily and remain as drivers for the segment.
“Going forward, we are forecasting 11 per cent to 13 per cent credit growth to be driven by the start of ETP-related projects and a five per cent gross domestic project (GDP) growth as forecasted by our economist,” added the report.
HwangDBS Vickers Research Sdn Bhd (HwangDBS Vickers) also stated in its report that the sector saw ample liquidity and robust asset quality as deposits grew 14.8 per cent y-o-y while loans-to-deposit ratio remained stable at 76 per cent.
Kenanga Research concurred, noting that there should be sufficient capacity to support stronger loans growth and capital market activities.
“Impaired loans decreased 0.5 per cent month-month to RM27 billion as net impairment ratio held at 1.9 per cent underpinned by low non-performing loans formations and a continued focus on recoveries. We expect continuous improvement in credit costs throughout 2012,” Kenanga Research added.
Following the reporting season and the strong rebound of a few banking groups from their October 2011 lows, the research house now marked its top picks are RHB Capital Bhd (RHB Bank) and CIMB Bank, backed by the potential merger and acquisition news flow which might re-rate the valuations of their stocks.