KUALA LUMPUR: The banking sector's loan growth in October strengthened to a year-on-year (YoY) increase of 6.0 per cent, driven by a 5.3 per cent contribution from the business segment, while the household segment remained steady at 6.2 per cent.
According to Hong Leong Investment Bank Bhd (HLIB Research), growth in the business segment was supported by improved lending to non-small and medium enterprises (SMEs), while the household segment remained primarily driven by home and auto financing.
"Overall, system loans growth came in within our full-year financial year 2024 (FY24) estimate of 5.5 per cent to 6.0 per cent YoY," it said.
HLIB Research noted that banks faced selling pressure following a significant price rally in August, coupled with the strong performance of the ringgit.
"Also, there is rotation back to US markets. That said, pullbacks are healthy, in our opinion, and it presents an opportunity to buy on weakness.
"Moreover, there is an upside bias to the net interest margin (NIM) estimate for next year, which is a boon for banks.
"Overall, we believe mid-sized banks have a better risk-reward profile," it said.
HLIB Research has maintained its 'Neutral' call on the banking sector.
The research house has two 'Buy' recommendations: RHB Bank Bhd, with a target price of RM7.30, for its attractive dividend yield and affordability as a KLCI index component.
AMMB Holdings Bhd, with a target price of RM6.15, is favoured for its significant capacity to increase dividend payouts.