PETALING JAYA: Improvement in the banking sector’s loan growth coupled with a pause in the Overnight Policy Rate (OPR) could help revive growth in banks’ net interest income (NII) to 3.7% in 2021 against -6.7% in 2020 according to CGS-CIMB.
The research house pointed out that loan growth moderated slightly from 4.5% year on year (yoy) at end-July 2020 to 4.4% at end-August 2020 with the slowdown attributed to the non-household loan segment which expanded by a slower rate of 3.7% yoy against 4.7% at end-July 2020.
On the other hand, a growth in household loan improved from 4.3% yoy at end-July to 4.8% at end-August, largely spurred by a turnaround in auto loan growth which saw an expansion of 1.5% yoy in August this year from a 0.2% decline in July 2020.
For the first eight months of 2020 (8M’20), the industry’s total loan expanded 2.4% which translated to an annualised growth of 3.6% for 2020F.
“However, we still see this as broadly in line with our projected loan growth of circa 3% for 2020F as we forecast slower loan momentum in 4Q’20,” CGS-CIMB said in a report.
“However, we expect the industry’s loan growth to normalise to 4-5% in 2021F, riding on the expected economic recovery with projected GDP growth of 7.5% (vs. an expected contraction of 4% in 2020F).”
In addition, CGS-CIMB pointed out that gross impaired loan (GIL) ratio continued to improve from 1.43% at end-July 2020 to another record low of 1.4% at end-August, due to the loan moratorium, during which most retail and SME borrowers did not need to service their loans.
Given this, there is a possibility banks’ end-December 2020 GIL ratio could be lower than the research house’s projection of 1.7%.
CGS-CIMB maintained its overweight call on the sector with its top picks being Public Bank, Hong Leong Bank, RHB Bank and AMMB.
Meanwhile, AmInvestment Bank Research (AmResearch) expects the industry loan growth to be at 3-4% for the year despite the pickup in household loan.
It pointed out that loan applications fell month-on-month in August while loan approvals remained slow.
Similarly, the research house expects no further OPR cuts this year which is expected to lead to a normalisation of banks’ interest margins from the earlier rate cuts.
On the whole, AmResearch has retained its neutral stance on the sector, with its top picks being Hong Leong Bank, RHB Bank and Maybank.
Source: The Sun Daily
No comments:
Post a Comment