TA Securities: Financial services index emerges as best winner in wider market, loan growth will accelerate in 2022

KUALA LUMPUR (Jan 11): The Bursa Malaysia Financial Services Index emerged as the top winner in the broader market, as some bank stocks soared, pushing the index higher on Tuesday (Jan 11).

Hong Leong Bank Bhd (HLB) was 80 sen or 4.17% above RM20 at the time of writing, valuing the bank at RM43.35 billion.

RHB Bank Bhd was one of the biggest winners after its shares jumped 29 sen or 5.31% to RM 5.75, resulting in a market cap of RM 23.82 billion.

Hong Leong Financial Group Bhd (HLFG) jumped RM 1 or 5.61% to RM 18.84, valuing the group at RM 21.62 billion.

TA Securities, in a research note released Monday, January 11, pointed out that loan growth for the banking sector has been on the rise since the government lifted the restriction of movement order.

“In 2022, we expect more robust loan growth of 5.8%, compared to the 5.2% forecast earlier.

“We believe the expansion will be fueled by 5.9% and 5.8% year-over-year growth in business and consumer loans, respectively.

“In addition, we expect consumer demand to remain robust thanks to more optimistic trends,” said Li Hsia Wong, analyst at TA Securities.

Wong added that while a planned 25 basis point (bp) hike in the overnight policy rate (OPR) is positive for the net interest margin (NIM), the research house estimated that banks would revive competition for loans and deposits on an improved macroeconomic outlook.

“While optimism has improved with economic activity expected to recover, we believe the underlying sentiment will still be subject to volatility amid ongoing macro challenges such as supply chain disruption. and slower growth in China.

“News of an emerging and highly infectious variant, Omicron, is fueling new fears that the government will put in place another lockdown if the infection rate gets out of hand again,” Wong said.

TA Securities has assigned the banking sector an “overweight” rating because it believes the banking system remains resilient, supported by healthy liquidity and capital buffers to absorb potential losses and support lending activities.

He also said that a favorable interest rate environment should help control the quality of systemic assets.

“Our optimism is supported by sector valuations to book value which continue to trade below 1.0x,” he said.

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