The performance of the banking sector in the second quarter is good, and the outlook for banking stocks remains bright.
(Kuala Lumpur, March 3) The overall performance of the banking industry in the second quarter of 2024 is good. Analysts predict that the net interest margin will stabilize in the future, and the prospects for profit growth remain bright, maintaining a positive rating.
According to Malayan Banking Investment Bank's latest report, based on its tracking of bank stocks, the core net profit of China's banking industry grew by 9% year-on-year in the first half of the year, mainly due to the continuous growth of operating profit by 7% and stable credit costs.
Therefore, analysts maintain a growth forecast of 7.6% in operating profit for the whole year of 2024.
This is mainly based on the forecasted domestic loan growth of 5.5%, average net interest margin expected to be 2.07%, non-interest income ratio of 25.1%, and cost-to-income ratio (CIR) forecasted to be 44.7%.
Taking into account the support of lower credit costs, namely 22 basis points, lower than 23 basis points in 2023, we have raised our core net profit growth expectation from 6.8% to 7.8%, while the average return on equity (ROE) of the banking industry is expected to be 10.4%.
According to Malayan Banking Investment Bank's latest report, based on its tracking of bank stocks, the core net profit of China's banking industry grew by 9% year-on-year in the first half of the year, mainly due to the continuous growth of operating profit by 7% and stable credit costs.
Therefore, analysts maintain a growth forecast of 7.6% in operating profit for the whole year of 2024.
This is mainly based on the forecasted domestic loan growth of 5.5%, average net interest margin expected to be 2.07%, non-interest income ratio of 25.1%, and cost-to-income ratio (CIR) forecasted to be 44.7%.
Taking into account the support of lower credit costs, namely 22 basis points, lower than 23 basis points in 2023, we have raised our core net profit growth expectation from 6.8% to 7.8%, while the average return on equity (ROE) of the banking industry is expected to be 10.4%.
Subtask: Low inflation can be maintained this year.
Analysts pointed out that the overall inflation rate last year was 2.5%. The bank's economists have lowered their inflation forecast for 2024 from the previous 3% to 2%, and expect inflation in 2025 to be in the range of 2.5% to 3%, due to the expected implementation of targeted fuel subsidies next year.
Although there is a positive return on deposit rates at present, given the prospect of rising inflation next year, it means that the central bank is unlikely to cut interest rates in the short term. The interest rate is expected to remain at 3% this year and next year, and the net interest margin is expected to stabilize.
Looking ahead to 2025, the growth of operating profit is expected to slow slightly to 5.8%, mainly due to the slowdown in non-interest income growth.
Although there is a positive return on deposit rates at present, given the prospect of rising inflation next year, it means that the central bank is unlikely to cut interest rates in the short term. The interest rate is expected to remain at 3% this year and next year, and the net interest margin is expected to stabilize.
Looking ahead to 2025, the growth of operating profit is expected to slow slightly to 5.8%, mainly due to the slowdown in non-interest income growth.
Sub-question: Profit is expected to increase by 6.1% next year.
However, supported by the continued loan growth of 5.5%, expansion of net interest margin, and slightly lower credit costs (21 basis points), core net profit is expected to grow by 6.1% next year, with the average ROE of banks expected to increase to 10.5%.
In addition, analysts stated that considering the unused management coverage reserves still held by most banks, they are expected to gradually release them, bringing unexpected pleasant surprises to credit costs.
In addition, analysts stated that considering the unused management coverage reserves still held by most banks, they are expected to gradually release them, bringing unexpected pleasant surprises to credit costs.
Taking the above into account, analysts maintain a 'positive' rating on the banking industry and recommend a 'buy'. $AMBANK (1015.BMS)$ , $MAYBANK (1155.BMS)$ $CIMB (1023.BMS)$ $PBBANK (1295.BMS)$ , $RHBBANK (1066.BMS)$ , $HLBANK (5819.BMS)$ , $HLFG (1082.BMS)$ .
"In this quarter, we will $ABMB (2488.BMS)$ Alliance Bank (ABMB, 2488, main board financial stock) rating was downgraded to "hold", while raised $RHBBANK (1066.BMS)$ Industrial Bank to a "buy" rating."
"In this quarter, we will $ABMB (2488.BMS)$ Alliance Bank (ABMB, 2488, main board financial stock) rating was downgraded to "hold", while raised $RHBBANK (1066.BMS)$ Industrial Bank to a "buy" rating."
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