MIDF Amanah Investment Bank Bhd (MIDF Research) maintained a POSITIVE outlook for the banking industry, highlighting a solid fundamental environment alongside attractive dividend yields. The research house noted that any profit-taking exercises should be an opportunity for investors to accumulate shares in this resilient sector.

Banking statistics for September 2024 reveal a positive trajectory in the Malaysian banking sector, marked by stable asset quality and a rebound in customer deposits.

In the latest data, system loans increased by 5.6% year-on-year (YoY) and showed a month-on-month (MoM) growth of 0.4%. Retail loans saw a robust increase of 7.4% YoY, bolstered by strong demand for residential and passenger vehicle financing.

Business loans, while slightly slower with a growth of 3.6% YoY, still indicated a positive MoM performance of 0.2%. The approval rate for new loans stood at 54%, indicating a healthy appetite for lending despite a seasonal decline in loan applications in September.

Amid these developments, MIDF Research has reiterated its positive stance on Maybank, maintaining a BUY rating with an unchanged target price (TP) of RM12.11. Maybank is recognised as a key beneficiary of foreign investor interest, attributed to its market-leading position and strong ESG (Environmental, Social, and Governance) scores.

Similarly, Bank Islam Malaysia Bhd has received a BUY recommendation with a TP of RM3.06, benefitting from a large customer base, particularly among civil servants, and capitalising on economic corridor developments.

On a broader scale, RHB Investment Bank Bhd (RHB Research) has also retained an OVERWEIGHT rating for the banking sector, identifying top picks that include AMMB Holdings Bhd, Alliance Bank Malaysia Bhd, CIMB Group Holdings Bhd and Hong Leong Bank Bhd.

Despite a moderation in loans and deposit growth — reported at 5.6% and 3.3% YoY respectively — RHB Research noted that net interest income growth could remain supported by previous deposit repricing efforts. The overall asset quality continues to improve, allowing room for potential overlay reversals that could positively influence bank earnings.

The September statistics also revealed a slowdown in loan applications and approvals, attributed to seasonal factors. Nevertheless, household loans, which constitute a significant portion of the banking system, are expected to sustain growth through the final quarter of 2024, with an annual increase of 4% in applications recorded year-to-date.

The banking sector continues to demonstrate resilience, with a gross impaired loan ratio improving to 1.54%, the lowest level since April 2021. This positive trend in asset quality reflects the stable economic environment and labour market conditions.

With capital ratios remaining stable and sufficient, the sector is well-positioned to navigate potential challenges, making it an attractive area for investment as the economic landscape evolves.