It said in a statement that this outlook is supported by better prospects in targeting high-quality assets while maintaining profits.
The investment bank’s research arm said loan growth is projected to be solid in 2024 at 5.5% to 6% amid rising concerns.
It said headlines cautioned higher inflation numbers and possible dents to overall productivity stemming from the recent diesel subsidy rationalisation, whereby input and transportation costs may rise.
“We believe that ‘stresses’ from here may likely materialise in the medium term and could still be subject to revisions in implementation.
“In the meantime, the progressive loading up of household loans from sustained mortgage demand could persist, thanks to more affordably-priced units launched,” it added.
Kenanga has also maintained its expectations for the overnight policy rate to remain unchanged at 3% throughout 2024.
“We believe Bank Negara Malaysia may approach monetary policies with greater scrutiny as the gravity of spillovers from the diesel subsidy rationalisation remains unclear.
“Meanwhile, the recent two percentage points increase in selected sale and service tax categories is also muddled into upcoming inflation reports,” it said.
Therefore, Kenanga suggested that the central bank needs to balance interest rates to support the already soft ringgit, as lowering it may spur institutions to adopt outflow positions from the country.
Additionally, it said the overall industry gross impaired loan would remain smooth, with banks reporting gradual improvements to respective readings.
“While we anticipate some slight uptick in the second quarter of 2024 in lieu of frontloaded festive spending, we opine that it would remain confined as the banks had mostly ironed out their books with pre-emptive provisions being allocated to troubled accounts,” it said.
Meanwhile, UOB Kay Hian Securities (M) Sdn Bhd, in its strategy report said the banking sector earnings growth is anticipated to decrease to 7%, down from 15% in 2023, primarily due to the absence of the prosperity tax and a slower expansion in non-interest income.
“However, a more stable net interest margin outlook and a rebound in loan growth, projected at 5.5% to 6% (compared with 5.3% in 2023), are expected to support overall growth,” it said.