Malaysian Banks' Earnings To Recover For CY22 Forecast

KUALA LUMPUR, Jan 3 (Bernama) -- Malaysian banks’ earnings is expected to continue to recover with a projection of 2.3 per cent core net profit growth for the calendar year 2022 forecast (CY22F), says a Malaysian research firm. CGS-CIMB Securities Sdn Bhd said it assumes a 25 basis-point hike in overnight policy rate (OPR) in mid-2022F. "The positive takes from the November 2021 banking statistics were the further improvements in loan growth and gross impaired loan ratio, from 1.52 per cent at end-October 2021 to 1.47 per cent at end-November 2021," it said in a research note Monday. Banks’ loan growth improved from 3.3 per cent year-on-year (Y-o-Y) at end-October 2021 to 4.3 per cent Y-o-Y at end-November 2021, it said. The momentum for both major loan segments, household loans and business loans also accelerated, the research firm said. For household loans, it rose from 3.7 per cent Y-o-Y at end-October 2021 to 4.1 per cent Y-o-Y at end-November 2021 . Meanwhile, business loans increased from 3.1 per cent Y-o-Y at end-October 2021 to 4.8 per cent Y-o-Y at end-November 2021. "We believe this was partly due to pent-up loan demand during the lockdown period in the second quarter to third quarter of 2021," it said. Having said that, the banking industry’s total loans expanded 4.0 per cent in the first eleven months of the year (11M21), above CGS-CIMB projected growth of 2.5 per cent to 3.5 per cent for 2021 forecast, due to stronger-than-expected recovery in business loan growth. For the banking sector, Hong Leong Bank has been selected as CGS-CIMB top pick among the Malaysian banks as it is one of the most defensive banks against the credit risks arising from COVID-19, followed by Public Bank Bhd and RHB Bank Bhd. Hence, CGS-CIMB continues to rate Malaysian banks as "overweight" as it believes the banking sector would benefit from the economic recovery. However, the key downside risk to the "overweight" call on Malaysian banks is weaker-than-expected economic growth in 2022F as this could cause banks to register higher-than-expected loan loss provisioning and softer loan growth. "Another downside risk is the negative impact from the three-month interest exemption for the Bottom 50 (B50) segment borrowers, which could be booked in by banks in the fourth quarter of 2021 forecast (4Q21F) or first half of 2022 forecast (1H22F). "For repayment assistance provided to borrowers, further downside risk for banks’ earnings could be similar interest exemptions offered by banks to small and medium enterprise (SME) borrowers," it said. -- BERNAMA