CIMB Securities has maintained an “overweight” rating for the Malaysian banking sector, driven by robust loan growth of 6.4% in July 2024. This growth, largely powered by household loans, highlights a rebound in consumer confidence despite concerns over the diesel rationalization plan initiated in June.
According to the report, CIMB loans and other household loans saw strong momentum, indicating resilience in the market. Furthermore, the ratio of gross impaired loans remained steady at 1.6%, demonstrating stability in loan quality. A slight reduction of RM293 million in impaired loans also contributed to an improved financial outlook.
The bank’s loan loss coverage ratio strengthened to 91.8% from 91.7% in June 2024, showing increased protection against potential defaults.
CIMB Securities has identified Hong Leong Bank Berhad and AMMB Holdings Berhad as its top picks for continued growth in the sector.
The firm also highlighted potential catalysts for further rerating, including stronger non-interest income from bond gains and an uplift in loan growth. A sector-wide net earnings upgrade of 5% is expected for every 2% improvement in loan growth.
However, risks such as external inflation pressures and potential rate hikes could impact the banking sector’s liquidity and asset quality.
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