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Malaysian banks to register stable loan growth of 10% to 11% [08-03-2013]  
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CIMB Equities Research projects stable loan growth of 10%-11% but continued margin slippage, albeit a milder one for Malaysian banks.

It said on Friday despite the stable impaired loan ratios, credit costs should be higher in 2013 due to lower recoveries and write-backs.

"We remain Neutral on Malaysian banks, with Maybank staying as our top pick," it said.

CIMB Research said net profit growth for the banks in its coverage weakened from 13.6% on-year in 3Q12 to 9.4% on-year in 4Q12.

The research house said the reason was net interest income growth which halved from 9.8% on-year in 3Q12 to 4.1% on-year in 4Q12 because of margin compression and slower loan growth. This was partly offset by a 43.4% plunge in loan loss provisioning (LLP).

"We are projecting 12.2% net earnings growth for the sector in 2013, catalysed by topline growth arising from 13.7% expansion of net interest income and 17.4% growth in non-interest income. On the cost front, overheads are forecast to advance by 10.7% while LLP is projected to jump 58.3%," it said.

CIMB Research said loan growth continued to soften from 11.9% on-year in September 2012 to 10.4% on-year in December 2012. The slowdown came mainly from business loans' growth deceleration from 12% on-year in September 2012 to 9% on-year in December 2012.

Consumer loan growth slowed by a much smaller margin - from 11.9% on-year in September 2012 to 11.6% on-year in December 2012.

"The gross impaired loan ratio improved by another 10 basis points on-quarter to 2% in December 2012 but loan loss coverage slid marginally from 101.7% in September 2012 to 100.9% in December 2012. We expect the impaired loan ratio to continue to drop to 1.8%-2% in 2013," it said.

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