3 days ago
- Business
- New Straits Times
Banking sector seen trading sideways amid tariff incertainty: CIMB Securities
KUALA LUMPUR: The banking sector is likely to trade sideways in the near term as investors await greater clarity on tariff developments, said CIMB Securities Sdn Bhd.
The firm has maintained its "Neutral" stance on the sector but kept its "Buy" calls on Alliance Bank Malaysia Bhd (ABMB), Public Bank Bhd (PBB), and RHB Bank Bhd, citing appealing dividend yields at current valuations.
"Key upside risks include lower credit costs, stronger net interest margins, and potential bond gains from non-interest income.
"Conversely, downside risks include a higher-than-expected cost of funds, liquidity outflows, and deterioration in asset quality," it said in a note.
According to CIMB Securities, loan applications grew 10.1 per cent year-on-year (YoY) in April 2025, from 4.4 per cent YoY in March.
Approved loans expanded 8.8 per cent YoY in April compared with 9.6 per cent YoY in March.
"Leading loan indicators were driven mainly by the corporate segment, specifically the purchase of fixed assets (other than land and buildings), construction, and working capital segments.
"There may be an element of front-loading in the numbers, as Malaysia's export growth accelerated markedly to 16.4 per cent YoY in April, driven by the 90-day pause in tariffs," it added.
Meanwhile, CIMB Securities noted that loan growth slipped marginally to 5.1 per cent YoY in April, compared with 5.2 per cent YoY in March.
This was supported by the auto, residential, and non-residential mortgage segments.
Deposit growth rose to 3.8 per cent YoY in April from 3.0 per cent YoY in March owing to stronger current account and savings account (CASA) deposit growth of 4.5 per cent YoY in April.
Business deposit growth was higher at 3.1 per cent in April after a flattish 0.7 per cent YoY rate in March but remains lower than the 6–9 per cent YoY growth recorded in 1H24.
The loan-to-deposit ratio eased slightly to 87.4 per cent in April from 87.6 per cent in March.
Furthermore, gross impaired loans increased 0.7 per cent or RM216.4 million, month-on-month (MoM) in April, mainly driven by the household segments.
The gross impaired loans ratio was stable at 1.43 per cent in April compared to 1.42 per cent in March, while loan loss coverage remained high at 91.0 per cent in April from 91.2 per cent in March.
