Loan growth in Malaysia to slow to 11% in 2013F

Rate of compression is likely to ease as well.

Nomura expects loan growth to moderate to around 11% in 2013F given their base-case real GDP growth forecast of 4.3%.

Here's more from Nomura:

As for NIMs, the rate of compression is likely to ease this year, we estimate, following evidence of stable consumer loan pricing over the past 18 months.

We have imputed a mild decline of 3bp in NIMs for the sector. More importantly, we view asset quality should remain healthy in spite of a slower GDP print. Credit costs are currently at a cyclical low of 27bps vs. the five-year historical average of ~80bps. For FY13F, we forecast credit costs to remain at 27bps.

Our large-cap picks are Maybank and CIMB as both are positioned to enjoy strong loan growth from the Economic Transformation Programme and its Indonesian units.

We also expect a re-rating of these stocks once the overhang from the national elections is lifted. Valuations look attractive, given the underperformance of banking stocks over the past 12 months.

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