In a banking statistics report today, MIDF Research highlighted that the surge was likely due to the high number of applications submitted following Bank Negara Malaysia monetary policy committee’s (MPC) decision to maintain the overnight policy rate (OPR).
“Regardless of the outcome (of the MPC meeting), (we believe) customers were eager to lock in deposits anyway,” it said.
As a result of the uptick in fixed deposits, banks’ current account and savings account (CASA) ratios dropped to 30.6%, marking a low since 2020.
“Despite erratic interbank spreads, banks maintain that there are no liquidity issues with LCR (liquidity coverage ratio) also remain(ing) at a high level,” said MIDF.
Loan growth has also stabilised, growing around 5% year-on-year, while month-on-month (m-o-m) growth is small but shows no decline.
CGS-CIMB Securities Research said separately in a note today that the easing on loan growth from 5.3% y-o-y at end-February was in line with the expected average loan growth of 4-5% for 2023.
CGS-CIMB analyst Winston Ng noted that banks’ gross impaired loan (GIL) contracted by RM162.5 million or 0.5% m-o-m in March 23, better than house expectations for a continuous uptrend in GIL.
Despite improvements in these indicators, MIDF expects net interest margin (NIM) pressure to lead to a lacklustre Q1 2023 earnings season due to deposit competition.
Earnings may be supported by a recovery in non-interest income (NOII) and more normalised operational expenditure.
“Apart from the downward repricing pressure from the global banking scare, a slew of banks are facing their respective pressures,” said MIDF.
It noted that several of them – Public Bank is facing succession issues, Ambank and CIMB face news flow related to Bersatu and the Malaysian Anti-Corruption Commission, and Affin Bank faces Pharmaniaga and Boustead-related concerns.
This created uncertainty within the industry, though MIDF noted that sector valuations remained attractive.
It reiterated a “positive” call on the sector despite headwinds, owing to improving deposit competition and recovering NOII.
MIDF’s top picks for the sector are Public Bank (“buy” with a target price of RM5.08) and RHB Bank (“buy” with a target price of RM6.74).