While the average lending rate has grown 172bps year-on-year (y-o-y) and 13bps month-on-month (m-o-m), total loan applications for the five months of 2023 grew 8% y-o-y, whereas loan approvals rose 28% y-o-y and 33% m-o-m.

Loan disbursements similarly increased by 7% y-o-y and 6% m-o-m.

“Our unchanged sector rating is premised on the steady delivery in earnings dividend growth, along with attractive yields and valuations, RHB investment said, adding if banks maintain deposit pricing discipline, a potential net interest margin recovery possibly in the second half of 2023 may be a near-term catalyst,” said analysts Nabil Thoo, David Chong and Wan Ammar Affan.

The research firm also reiterated its forecast of a roughly 5% y-o-y growth in system loans for this year.

According to its research note dated July 3, system loans grew 4.8% y-o-y and 0.5% m-o-m in May 2023.

Other key growth drivers were mortgages (7% y-o-y; 1% m-o-m), hire purchase (9% y-o-y; 1% m-o-m), and working capital (4% y-o-y; 1% m-o-m).

Loan growth among household and non-household segments remained robust with rates of 5% y-o-y (flat m-o-m) and 4% y-o-y (1% m-o-m) respectively.

RHB Investment added that it saw loans to the financial sector growing 14% y-o-y (1% m-o-m) and to the wholesale and retail trade sectors, 7% y-o-y (1% m-o-m).

Meanwhile, system deposits grew 7% y-o-y (1% m-o-m) in May, outpacing loan growth during the same period as consumers continued to shift from current account savings account (Casa) deposits to more lucrative fixed deposits (FD).

“As expected, depositors continued to shift from Casa deposits to the more lucrative FDs which in May stood at 2.9%, the highest it’s been since 2020,” the analysts said.

RHB Investment’s top picks for the sector are Malayan Banking Bhd with a target price (TP) of RM9.45, Hong Leong Bank Bhd (TP: RM22.60) and CIMB Group Holdings Bhd (TP: RM6).