PETALING JAYA: However heightened dangers led to by geopolitical tensions, institutional traders “stay constructive on banks” and see the sector benefiting from reopening of the home financial system.
RHB Analysis, which held 11 conferences with institutional traders over the previous week, mentioned that general, there was restricted pushback on the agency’s name to keep up its obese sector score.
Nonetheless, it mentioned “there was a choice for extra defensive shares given the Russia-Ukraine battle”.
The issues have been primarily on asset high quality, referring to additional shock provisions and potential internet curiosity margin (NIM) stress on intensified competitors for present account financial savings accounts (CASA), mentioned the analysis agency.
It additionally believed that NIM slippage will likely be manageable in monetary 12 months 2022 (FY22).
“With a still-high stage of uncertainty on outlook, banks are concentrating on reasonable mortgage progress in 2022. We count on deposit progress to maintain tempo, conserving loan-to-deposit ratio at excessive 80% ranges, thereby decreasing the necessity for aggressive deposit competitors ,” it mentioned in a report.
It famous that whereas CASA progress had moderated on the pick-up in financial actions, banks imagine that CASA secured previously two years was stickier versus that of 2015- 2016 interval.
“This reinforces our view that banks with stronger CASA franchises will likely be higher positioned to maintain NIMs,” it mentioned.
The analysis agency added that Malaysian banking shares beneath its protection have guided for secure to single-digit declines in NIMs for FY22, with the modest compression coming from funding value pressures and the extensively anticipated 25 foundation factors in a single day coverage charge hike within the fourth quarter ( This fall) of 2022 having no materials uplift on NIMs
On provisions, it mentioned there have been lingering issues following the shock provisions seen within the current This fall of 2021 outcomes though it was usually agreed that banks’ asset high quality has improved on beneficiant provisions on Covid-19-affected companies and better danger accounts.
“These embrace draw back from publicity to commodity merchants, and extra provisions on excessive danger accounts corresponding to oil & fuel (O&G) and tourism-related.
“We expect lumpy provisions forward ought to be pretty restricted, as banks have taken fairly a good bit of provisions over the previous two years,” it added.
Based on the analysis agency, CIMB Group Holdings Bhd guided for extra provisions in Q1 of 2022 referring to the double crediting difficulty, whereas we must also see residual provisions from AMMB Holdings Bhd in relation to its O&G exposures.
As for the potential influence from new digital banks, which is slated to be awarded subsequent week, RHB Analysis mentioned it ought to have restricted disruptions to the traditional banks within the close to time period.
“We imagine the banks are well-positioned to fend off potential competitors from the brand new digital banks, if any,” it added.