The 5.3% increase in loans extended by the banking system in 2023 surpassed forecasts, yet experts have pointed out a deceleration in loan requests from households.

Malaysia’s banking system exceeded expectations with a 5.3% loan growth as of December 2023 in Kuala Lumpur. However, analysts have noticed a concerning trend of increasing household loan applications. If this trend continues, it could potentially slow down loan growth in 2024. To counter this, analysts believe that business loan growth will provide some cushioning, especially with the government’s plans to roll out major public infrastructure projects.

MIDF Research noted that there was a decline in loan applications for key drivers such as mortgages, hire purchases, and working capital. This could potentially lead to a slowdown in loan growth in 2024. However, the research house maintained a positive outlook for the banking sector and predicted a loan growth of 4.5% to 5% for 2024. Their top picks for the sector are CIMB Group Holdings Bhd and Alliance Bank Malaysia Bhd.

Similarly, CGS-CIMB projected a slower loan growth of 4% to 5% in 2024, citing a potential decline in automotive loan growth due to weaker car sales. They also expect a low loan loss provision in the fourth quarter of 2023, which could be even lower than the previous corresponding quarter. CGS-CIMB maintained an overweight rating for the banking sector, with a strong estimated dividend yield of 5.1% for 2024. Their top picks are Hong Leong Bank Bhd, Public Bank Bhd, and RHB Bank Bhd.

RHB Research also expects business loans to continue their strong momentum in 2024, while the household segment may slow down due to a higher base effect. They predict a 4.5% to 5% loan growth for the banking system and maintain a neutral rating for the sector. Their top picks include CIMB, AMMB Holdings Bhd, Hong Leong Bank, and Alliance Bank.

Overall, while the positive macroeconomic environment may support the performance of banking stocks, analysts do not expect significant outperformance in the sector in 2024. They predict a moderate earnings growth of 6% year-on-year.  

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