Malaysia's banking sector is expecting a seven percent earnings growth this year.
HwangDBS Research analyst Hon Seow Mee ascribed it to the 9 percent non-interest income growth for 2012, but quicker acceleration of the Economic Transformation Programme projects could boost growth.
“Net interest margin is expected to dip mainly from competitive pressures, but short-term implications of a policy rate cut could further exacerbate NIM compression, particularly for Alliance Finance Group Bhd and Hong Leong Bank Bhd,” he said.
Pre-provision profit for the fourth quarter of 2011sector grew five per cent quarter-on-quarter while non-performing loan ratios improved with low asset quality stress.
Loans grew 14 per cent in 2011, but Hon expected moderation in 2012. Competition for low cost deposits was expected to intensify, putting further pressure on NIMs.
“We forecast seven per cent earnings growth for 2012, premised on robust 13 per cent loan growth, three bps NIM contraction, and stable noninterest income and provisions," said Hon.
The analyst’s top pick was Maybank, with the assumption that the bank would maintain 70 per cent dividend payout ratio, implying six per cent yield.
She also mentioned AFG for its scalable domestic franchise and non-interest income traction, and HLB for merger synergies.
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