CGS-CIMB sees bank loan growth slow in H2 2022

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HSBC bank and Maybank buildings are seen in Kuala Lumpur on November 3, 2020. – Image by Hari Anggara

Friday 03 June 2022 11:19 GMT

KUALA LUMPUR, June 3 – CGS-CIMB Securities Sdn Bhd (CGS-CIMB) expects banking sector loan growth to peak at just over 5% in the next two months and moderate in the second half 2022 (2H 2022) due to rising inflation and rising interest rates.

“This is in line with our expectations and projected loan growth of between 4% and 5% for this year,” the research house said in a note today.

He also expects the sector’s loan growth to remain strong at more than 5% in May and June this year, given the solid 19.1% expansion in loan approvals in April.

Nonetheless, CGS-CIMB noted that year-over-year (year-on-year) loan application growth has weakened over the past two months, while loan applications have contracted by 0, 5% YoY in April 2022.

“We see them as the first signs of slowing industry loan growth over the medium term,” he said.

Meanwhile, he expects banks’ Gross Impaired Loans (GIL) to rise from their forecast of 1.8-2.0% by the end of December 2022, as Covid-19 related credit risks do not have not yet fully subsided.

“In addition, high inflation and interest rate hikes could put additional pressure on banks’ asset quality, but we don’t expect the impact to be material,” he said. .

Overall, the research house maintained its “overweight” rating on banks, with potential revaluation catalysts including net interest margin expansion amid a rising overnight rate. and lower provisioning for loan losses due to credit risks due to Covid-19. hatching fades.

“The main potential downside risks to our call for an ‘overweight’ position in Malaysian banks include weaker than expected economic growth in 2022, as this could cause banks to record higher than expected loan loss provisions and a lower loan growth.

“Our picks for the sector are RHB Bank Bhd, Hong Leong Bank Bhd and Public Bank Bhd,” he added. — Bernama

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