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Predictions for a fall in loan growth for Malaysia

Predictions for a fall in loan growth for Malaysia

(20 February 2013 – Malaysia) Loan growth in Malaysia is set to slow to 11 percent for the full 2013 year according to new source. The source expects loan growth to moderate to around 11 percent this year, given the base-case real gross domestic profit growth forecast of 4.3 percent.

Net interest margins (NIMs) will be affected by a likely easing of the rate of compression following evidence of stable consumer loan pricing over the past 18 months.

"We have imputed a mild decline of three basis points in NIMs for the sector. More importantly, we view asset quality should remain healthy in spite of a slower GDP print.

"Credit costs are currently at a cyclical low of 27bps versus the five-year historical average of ~80bps. For FY13F, we forecast credit costs to remain at 27bps.

"Our large-cap picks are Maybank and CIMB, as both are positioned to enjoy strong loan growth from the Economic Transformation Programme and its Indonesian units.

"We also expect a re-rating of these stocks once the overhang from the national elections is lifted. Valuations look attractive, given the underperformance of banking stocks over the past 12 months," the source published in a statement.
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