KUALA LUMPUR: Banking sector's profit is expected to grow at a slower rate in the next financial year 2024 (FY24) and FY25, said Hong Leong Investment Bank Research (HLIB).
The firm said this is because net interest margin (NIM) is not expected to recover meaningfully, as non-interest income (NOII) growth slows, and no more non-cash charge (NCC) write-backs.
"Regardless, valuations are not excessive and hence, we feel it is too premature to turn full-on bearish," it said in a note.
HLIB said system loans growth lost tempo to 4.0 per cent year on year (YoY) but deposits held firm at 4.3 per cent. That said, both leading indicators and asset quality improved, it said. For NIM, the bank sees it to remain relatively stable next quarter, considering that fixed deposit (FD) rivalry is still fairly rational, despite seasonally more competitive year end (unlike back in the fourth quarter 2022).
"All in all, the risk-reward now is balanced as there are no new positive catalysts to spur share prices significantly higher. "Maintain Neutral on banking sector. Our buy ratings include Public Bank Bhd, AMMB Holdings Bhd, and Alliance Bank Malaysia Bhd," it added.