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Malaysian banking industry showing trend of weakness

Via Malay Mail : The Malaysian banking industry is showing a trend of weakness with poor first quarter (Q1)earnings for this year, says Malaysia Equity Research.

The research firm said the weak earnings traction was however, within expectation, except for Maybank and AMMB which registered a lower-than-expected core earnings.

In a research note today, it said moderation in loan growth was apparent as the banks reported this in the mid-single digit range versus a historically high single digit to low double-digit levels.

“A similar trend was noted for deposits. However, on a positive note, the Net Interest Margin (NIM) trend has stabilised year-on-year,” said Malaysia Equity Research.

It said moving forward, revenue growth is expected to be challenging, amid slower loan growth and lacklustre capital markets, while banks keep their costs in check.

The firm said Public Bank Bhd (PBK) and Hong Leong Bank Bhd (HLB) remained its top picks and reiterated a “buy” call for both banks whose strong credit culture has prevailed in the current challenging environment.

Malaysian Equity said it continues to like PBK for its resilience and ability to defy headwinds which are likely to persist in the year ahead, while for HLB, a strong liquidity and asset quality position remained its key plus points.

As at 11am, PBK gained 12 sen to RM19.04 with 251,800 shares changing hands, while HLB eased six sen to RM13.24, with 82,500 shares traded.

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