PETALING JAYA: Malayan Banking Bhd (Maybank) is expected to see a lower loan growth of 6% to 7% for financial year 2024 (FY24) compared with 9% in FY23, according to Kenanga Research.

The research house, which had a meeting with the bank’s management recently, said this lower growth target would be fuelled by slower but sustainable demand on most fronts, with better support coming from recoveries in consumer spending and economic activity.

At the same time, its global banking units are seeking to benefit from regional recoveries, predominantly in Indonesia’s high-growth status and rising corporate portfolios, it said.

“Domestically, the group expects tailwinds to arise from more secondary mortgage transactions, which we opine may lead to more market share as certain competitors may lose appetite to be aggressive in this space.

“Meanwhile, it is investing in more interface enhancements and features to keep the small and medium enterprise (SME) and business accounts.

“That said, as the group is expecting the roll-out of public infrastructure projects to meet its targets, untimely delays may undermine its traction here,” Kenanga Research added.

Coming out of FY23’s severe net interest margin (NIM) compression of 27 basis points (bps) from a tighter deposit landscape, the brokerage said the group believes that similar pressures could have mostly subsided.

NIM is a measure of the difference between the interest income generated by banks through loans and the amount of interests paid to depositors.

On the flipside, the group continues to expect NIM compression to occur in FY24, citing up to minus five bps.

“We believe this could be tied to higher loan demand across the board in line with better economic prospects, as banks now have to compete more aggressively to retain financing market share,” it said.

Kenanga Research said the group’s overlay reserve of RM1.6bil as at the fourth quarter of FY23 (4Q23) would likely remain allocated for, in lieu of retail SMEs likely to be vulnerable to macro shifts in the near term.

Adding to this, it said the group may continue to top up its provisions on these accounts to carry its loan loss coverage ratio to be above 100%. Consideration to write back its excess provisions may only occur in FY25, soonest, the research house added.

In FY23, the group enjoyed strong non-interest income (plus 38%) mainly from surges in treasury gains. While this could moderate in FY24, better traction could be seen from its fee-based streams with wealth management businesses seeking to penetrate into regional markets, it said.

Meanwhile, Kenanga Research said better insurance results from insurer Etiqa could be on the way, thanks to efforts to drive bancassurance and motor class products.

In terms of dividends, the brokerage said going forward, the group looks to continue proposing cash dividends although it mentioned it was not to manage share base liquidity.

“That said, while the group has a dividend policy of 40% to 60%, we continue to anticipate payments above that with the recent full cash payment to still linger at around 77% of earnings,” it noted.