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Valuations remain attractive for banks, AmInvest retains overweight

KUALA LUMPUR: AmInvestment Research is retaining its overweight recommendation for banks as it views the valuation remains attractive.

It said on Wednesday its buy calls are RHB Bank (FV: RM6.10), Public Bank (FV: RM26.20), Alliance Bank (FV: RM5), BIMB Holdings (FV: RM5.40), CIMB (FV: RM6.80) and Maybank (FV: RM10.70).

Industry loan growth gained ground to 5% year-on-year in June 2018 from 4.9% year-on-year in May 2018 with an improvement in both household and non-household loans. 

On a year-to-date (YTD) basis, industry loan growth surged to 5.2% annualised versus its expectation of a 5% growth for 2018.

Loan applications and approvals picked up in June 2018, particularly loans for purchase of passenger cars. 

June 2018 saw the growth in industry loan applications climbing to 13.3% year-on-year from -9.2% year-on-year in May 2018. 

Both household and non-household loan applications were higher in June 2018. 

Growth in applications and approvals for loans to purchase of passenger cars, personal loans and credit cards improved in line with the expected increase in consumer spending taking advantage of the tax holiday.

The tax holiday is the three-month period between the implementation of zero-rated GST on June 1 and the reintroduction of the sales and services tax on Sept 1.

Industry deposit growth gained traction in June 2018 contributed by higher individual and business deposit growth. 

Industry deposit growth rose to 5.2% year-on-year from 4.9% year-on-year in the preceding month underpinned by an improvement in growth of business deposits to 9.0% year-on-year (May 2018: 8.8% year-on-year) and individual deposits to 5.4% year-on-year (May 2018: 4.2% year-on-year). 

Industry current accounts and savings accounts (CASA) growth fell to 3.9% year-on-year resulting in a slightly lower CASA ratio of 26.7%. 

The sector's weighted average lending rate (ALR) rose to 5.55% compared to 5.43% in the preceding month while the weighted base rate stayed unchanged at 3.89%. The average deposit rate (the average rates for FDs of up to one-year tenure) dropped slightly to 3.18%. 

Interest spread (using the difference of the weighted average lending rate and 3-month FD rate as proxy) rose to 2.4% (2.28% in May 2018) due to a higher ALR. 

“For 2H18, we continued to expect the OPR to be maintained at 3.25% based on the headline inflation which is still expected to be low,” it said.


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