PETALING JAYA: The local banking sector is likely to experience a more conducive environment on the back of a favourable macroeconomic conditions and ebbing headwinds on margins and asset quality.

       RHB Research forecasts 2024 operating income growth of 5% year-on-year (y-o-y) on net interest income (NII) and non-interest income, compared to an increase of 2% y-o-y in 2023 on market-led non-interest income.

       The research house anticipates NIM stabilising in 2024 on the key assumption that deposits and loan competition stay rational, with the sector NIM having compressed by 21 basis points in 2023.

       “As for loan growth, we expect a mild pickup in system loan growth to 4.5%-5% in 2024 (2023: 4%-4.5%), led by stronger credit demand from the business segment as global trade improves as well as the roll out of infrastructure projects and initiatives under the various government master plans,” it added.

       While the research house expected a more conducive setting for banks this year, it maintained a “neutral” stance on the sector as it does not see overall meaningful performance this year.

       “We expect 2024 sector earnings growth to decelerate to 6% y-o-y versus the 11% of 2023, and trails our 2024 normalised earnings growth for the FBM KLCI and coverage basket of 10% y-o-y,” the research house said.