Maybank IB maintains 'neutral' on banking sector despite OPR cut
Maybank IB says the OPR cut is expected to have a marginally negative impact on banks' earnings, but this is buffered in part by the recent 10 basis point base rate hike by some of the banks.
Maybank Investment Bank (IB) Research has maintained its "neutral" call on the banking sector despite the overnight policy rate (OPR) cut by 25 basis points.
In a note today, Maybank IB said the cut is expected to have a marginally negative impact on banks' earnings, but this is buffered in part by the recent 10 basis point base rate hike by some of the banks.
"We do not rule out the possibility of other banks following suit and our forecasts are maintained, premised on the expectations that the impact to loan growth would likely be subdued as well," the research house said.
It also said the loan growth is unlikely to pick up pace dramatically as the household debt level is higher at 89.1 percent at the end of 2015 versus just 60.4 percent at the end of 2008.
In addition, the industry loan approval rates have been declining and loan/deposit rations are more elevated today at 87.6 percent at the end of May 2016 versus just 77.9 percent in April 2009.
"This coupled with sluggish growth in deposits, banks will likely remain selective in their lending activity," Maybank IB added.
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