KUALA LUMPUR: RHB Research is maintaining its overweight recommendation on the banking sector and its top picks are Malayan Banking, CIMB and AmBank.

       In its research note on Friday, it said August loans shrank as the lockdown impact continued to unfold, but it is seeing early signs of improvement.

       “System loans demand has begun to rebound as the government gradually relaxes restrictions,” it said.

       RHB Research said the PEMULIH moratorium has caused a freeze in most asset quality movements.

       It pointed banks are still in discussion with the regulators on the B50 interest-free moratorium despite the programme supposedly starting on Friday.

       “We expect a neutral reaction by investors as the impact has likely been priced in,” it said.

       RHB Research said it is awaiting details on B50 interest-free moratorium. Technically, Bank Negara Malaysia should have already announced details of the moratorium as it is scheduled to begin today.

       “However, based on our channel checks, banks are not likely to begin the moratorium as scheduled seeing that they are still in discussion with Bank Negara. That said, the impact may still be the same as banks are likely to back date the moratorium.

       “We expect minimal reaction from investors upon the announcement as the impact has mostly been priced in,” it said.

       RHB Research said the banking sector’s August system loans shrank -0.16% MoM (+2.5% YoY) as the impact of lockdown continued to unfold.

       The 8M21 annualised loans growth further slowed to 2.3% YoY as a result. Mortgage was the only major segment that grew (+0.4% MoM), with auto loans falling another 0.9% MoM. The construction sector saw a 3% MoM decline as well.

       As for loans demand it has bottomed and rebounding. System loans demand, on a three-month moving average (3MMA) basis, declined 6% MoM. Household segment fell 12% MoM but the business segment increased 3% MoM.

       On a monthly basis, loan applications rebounded 12% MoM, driven mostly by the household segment – applications for mortgage and auto loan saw a 6% and 51% MoM increase.

       The transport & storage and wholesale & retail sectors also saw 63% and 26% MoM increase in loan applications.

       Meanwhile, system deposits were flat MoM (+3.5% YoY), with system loan-deposit ratio (LDR) fairly steady at 88.4%.

       System current account/savings account growth momentum slowed slightly but still grew 0.3% MoM – system CASA ratio was slightly higher MoM at 41.5%.

       SME financing fell slightly 0.2% MoM in July, bringing 7M21 annualised growth softer to just 0.7% YoY. The MoM weakness was broad based, with agriculture (-2.6%) and wholesale & retail (-0.4%) leading the declines.