RHB Research maintains underweight on banking sector

KUALA LUMPUR (Dec 1): RHB Research Institute is keeping its underweight outlook on the banking sector as it expects system-wide loan growth to ease further to between 8% and 9% in 2012.

The research house said on Thursday for 2012, it expected system-wide loan growth to ease further to 8%-9%, in line with a slowdown in economic growth and higher base effect.

“While we believe loan growth for the business segment would likely slow down in the event of a downturn, we think the slowdown could be cushioned to an extent by the implementation of projects under the Economic Transformation Programme (ETP),” it said.

RHB Research said however, demand for loans from the household segment might not be as resilient and robust as what it had seen thus far.

Notwithstanding October’s resilient loan growth, it was maintaining its 2011 loan growth expectations of 11% to 12% for the banking system (2010: up 12.8%).

It added the banking sector’s October performance showed that system-wide loan growth eased to 13.1% on-year as compared to an increase of 3.8% on-year in September.

Loans to businesses grew by a slower pace of 13.6% on-year in October (versus September: +15.4% on-year) but household loan growth remained steady at 12.6% on-year (September: +12.5% on-year).

Total applications in October were RM63.4 billion (+11% on-month, as compared to the high of RM71 billion recorded in March 2011. Applications from businesses and households rose 8.8% and 2.7% on-year respectively.

The approvals in October stood at RM32.6 billion, up from September’s RM30.5 billion on the back of higher loan approvals to household (+13% on-month. This, however, was still some way off the high of RM39 billion in March 2011.