PETALING JAYA: Given a more subdued economic outlook in 2020, Affin Hwang Capital has kept its loan growth target unchanged at 3% while not discounting the possibility of a further increase in the system impaired loans as sentiment deteriorates.
It said the system gross impaired loan ratio was relatively unchanged at 1.51% on January, while the outstanding impaired loans rose 2.8% month on month (mom), attributable to some stress in lending to certain sectors, such as finance/business activities, wholesale/retail, construction, transportation and the household sectors.
“Notably, the working capital, residential property, construction and commercial property segments make up the bulk of impaired loans by ‘loan purpose’,” the research house said in a report yesterday.
The banking system saw loan growth of 3.5% year on year (yoy) in January, while staying flat on a mom basis.
“Key sectors driving our system loan growth includes household loans (primarily residential properties, credit cards), as well as manufacturing, construction and wholesale/retail sectors,“ said Affin Hwang.
Subsequent to the OPR cut in January and coupled with the impact of another potential cut (of 25bps) today (Tuesday), it expects the overall banking system net interest margin (NIM) to edge down by around 10bps in 2020 to 2.02%.
“The commercial banks’ average lending rate (ALR) continued to trend lower to 4.60% mom (from 4.7% in December). The recent 25bps rate cut in January will drive the commercial banks’ ALR lower, while banks’ funding costs will eventually edge down lower in the next six months,“ said Affin Hwang.
It maintained its neutral banking sector view as it foresees a contraction in sector core of 1.8% in 2020 and flat growth in 2021. Its top picks are AMMB Holdings Bhd and Aeon Credit Service (M) Bhd.
source https://www.thesundaily.my/business/affin-hwang-keeps-banking-sector-s-loan-growth-target-but-says-impaired-loans-may-increase-GN2069448
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