MIDF: Banks loans growth moderate in H2

KUALA LUMPUR: MIDF Research continues to expect loans growth in the banking system to moderate in the second half of the year, with the prolonged Eurozone debt crisis and weaknesses in the economic growth of the United States and China.

Loans growth in June was fairly robust at 12.6 per cent year-on-year and it is the fastest pace thus far this year, having risen steadily over the past few months.

"With the strong momentum in business loans growth, we are now expecting the system loans growth to be between 10 per cent and 11 per cent this year, compared to nine per cent and 10 per cent, previously," MIDF Research said in a research note.

It also expects net interest margin (NIM) pressure on banks to continue due to competitive pressure on asset yield and cost of funds.

"Banks are still competing for deposits and that is expected to exert pressure on their cost of funds," the research house said.

Meanwhile, HwangDBS Vickers Research has maintained its 12 per cent loans growth target for this year with Malayan Banking Bhd and Hong Leong Bank Bhd as its top pick.

"The key risk to our forward earnings for banks will be the timing of the Economic Transformation Programme projects and excessive pressure on NIM," it said.

Maybank IB Research also maintained its forecast of 10.5 per cent loans growth this year while making a neutral call on the sector. -- BERNAMA