Following a 25 basis point increase in the overnight policy rate (OPR) in May, RHB Investment Bank Bhd still sees potential in the banking sector.
This is due to the resilience shown in funding requests, prompting RHB to maintain an 'overweight' recommendation for this sector.
The number of loan applications in the five-month period of 2023 increased by 8% year-on-year even though the average loan rate increased by 172 basis points year-on-year and 13 basis points month-on-month.
Meanwhile, loan approvals increased by 28% year-on-year and 33% month-on-month, while loan disbursements also increased by 7% year-on-year and 6% month-on-month.
RHB analysts said its unchanged rating was based on stable delivery of dividend income growth along with attractive yields and valuations.
He added that if banks maintain deposit pricing discipline, the potential recovery of net interest margins in the second half of 2023 may be a catalyst in the near term.
In addition, it also reiterated the projection in system loans for this year with growth of about 5% year-on-year.
The research firm also expects loans to the financial sector to rise 14% year-on-year and the wholesale and retail trade sector to rise 7%.
RHB Investment's top choice for the sector is Maybank with a target price (TP) of RM9.45, Hong Leong Bank at RM22.60 and CIMB at RM6.
