KUALA LUMPUR – Malaysia’s banking sector’s rating is still “overweight” for 2022, bolstered by its consistent performance over the first quarter of this year (Q1 2022), said RHB Research.
An article published by The Edge states that the research firm published a note recently to say that while the underlying momentum heading into Q2 2022 is solid, the local banks have adopted a cautious stance regarding business growth and asset quality. This further reflects the banking sector’s largely defensive attributes and Malaysia’s gradual economic recovery.
Based on the information presented in the article, RHB Research is anticipating a 5.4% increase in earnings for 2022’s year-on-year (Y-o-Y) performance. This is relatively unchanged following results of Q1 2022, with the return on equity (ROE) remaining stable at 9.4%.
Furthermore, despite challenges like increasing inflation, geopolitical tensions, and the lingering impacts brought on by the pandemic, banks are maintaining their guidance for a loan growth of between 5% to 6% this year.
The note adds that in light of Bank Negara Malaysia’s overnight policy rate (OPR) hike by 25 basis points (bps), which happened earlier than anticipated, it is expected that another 25 bps hike would happen sometime in the second half of this year.
As a result of this, Malaysian banks are a little more optimistic about the net interest margins (NIMs) for 2022’s financial year.
The note said that “There are signs of a pick-up in deposit competition with some banks undertaking fixed deposit campaigns to lock-in longer-term deposits ahead of the likely OPR increase in the future.”
Additionally, this would result in a moderation in the growth of current account saving account (CASA). Analysis from the research firm indicates a 2% uplift to the sector’s earnings from the 25bps OPR increase over a 12-month period.
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