MIDF neutral on banking sector for 2014

KUALA LUMPUR: MIDF Research remains neutral on the banking sector as it expected loans growth for 2014 to be moderated about 10 to 11 per cent on the back of a Gross Domestic Product (GDP) growth forecast of 5.0 per cent.

In a note today, MIDF said it continued to expect consumer loans growth to moderate in 2014 due to higher inflation and tightened measures by Bank Negara

Malaysia to manage household debts.

"Nevertheless, we expect business loans growth to trend higher than in 2013 on the back of an improvement in external trade which will offset the moderation

in consumer loans growth," said MIDF.

The research house said it expected more pressure from the liabilities side of banks, adding that the sector's liquidity turned tighter in the fourth quarter of 2013 with a rise in loans-to-deposit ratio.

"Hence we expect competition for deposits to be more intensive," it said.

Non-interest income growth would remain challenging as uncertainties continue to surround capital market activities.

Moving forward, credit cost is also likely to trend higher due to lower recovery as well as due to higher collective impairment allowance (CA) of some banks amid the new minimum CA ratio requirement of 1.2 per cent by the central bank, it said.

MIDF maintained a buy call on Maybank with a target price of RM11.00, RHB Capital Bhd (RM9.50) and Hong Leong Bank (RM16.50).-