'Interest margin pressure may affect banks'

KUALA LUMPUR: Overall banking sector performance may
continue to lag, especially, if net interest margin pressures continue to persist coupled with a further moderation in consumer loans growth, says OSK Research.

Against this backdrop, OSK continued to maintain its selective buying strategy on banks, such as CIMB Bhd, Malayan Bank Bhd and RHB Capital Bhd, that would benefit directly from the eventual financing and capital market related growth emanating from further Economic Transformation Programme growth traction.

In a research note, OSK said the bright spot that could help mitigate the downside risk on net interest income growth was the continued improvement in provisions, underpinned by lower collective assessments and relatively benign system-wide non-performing loans.

"While we observed disappointing growth trends in loans disbursements for properties and personal loans for credit cards, the industry loans growth for June is supported by business loans in anticipation of ETP-related initiatives.



"Furthermore, a strengthened asset quality, healthy impaired loans ratios, increased provisions and resilient liquidity levels in the industry will help spur further support for financing needs to the ETP projects," it added.

Loans growth in June improved 10 basis points to 12.6 per cent,
year-on-year, compared with a 12.5 per cent year-on-year growth registered in May.

First half annualised loans growth of 12.7 per cent came in
better-than-expected, underpinned by loans growth for non-residential properties, residential properties, purchase of securities and lending to the construction sector.

However, the first half annualised loans growth reflected a
moderation compared with last year's first half annualised loans growth of 14.5 per cent. -- BERNAMA