Highlights

Banking - Just Minor Bumps

Date: 02/08/2021

Source  :  HLG
Stock  :  MAYBANK       Price Target  :  9.40      |      Price Call  :  BUY
        Last Price  :  8.15      |      Upside/Downside  :  +1.25 (15.34%)
 
Source  :  HLG
Stock  :  PBBANK       Price Target  :  4.50      |      Price Call  :  BUY
        Last Price  :  4.24      |      Upside/Downside  :  +0.26 (6.13%)
 
Source  :  HLG
Stock  :  RHBBANK       Price Target  :  6.85      |      Price Call  :  BUY
        Last Price  :  5.70      |      Upside/Downside  :  +1.15 (20.18%)
 
Source  :  HLG
Stock  :  AMBANK       Price Target  :  2.85      |      Price Call  :  BUY
        Last Price  :  3.39      |      Upside/Downside  :  -0.54 (15.93%)
 
Source  :  HLG
Stock  :  BIMB       Price Target  :  5.20      |      Price Call  :  BUY
        Last Price  :  3.25      |      Upside/Downside  :  +1.95 (60.00%)
 
Source  :  HLG
Stock  :  AFFIN       Price Target  :  2.15      |      Price Call  :  BUY
        Last Price  :  1.74      |      Upside/Downside  :  +0.41 (23.56%)
 
Source  :  HLG
Stock  :  ABMB       Price Target  :  2.60      |      Price Call  :  BUY
        Last Price  :  2.77      |      Upside/Downside  :  -0.17 (6.14%)
 


Both system loans and deposits growth tapered to 3.4% and 3.9% respectively. Also, leading indicators turned softer & asset quality showed some weakness. As for NIM, we expect it to be stable, premised on no OPR cut & benign deposit competition in 2021. Despite the nationwide lockdown, we stay optimistic on the sector given: (i) Covid-19 vaccination rollout, (ii) undemanding valuations, and (iii) ample market liquidity. Retain OVERWEIGHT; BUY calls include: Maybank, Public, RHB, BIMB & Affin.

Loans growth tapered in Jun-21 to 3.4% YoY (May: 3.9%), given weaker household segment (HH, +5.2% vs May: +6.1%) as slowdown was seen across the board. That said, business (Biz) lending growth nudged up a little to 0.9% (May: +0.4%), thanks to better working capital loan (+1.7%). Overall, it was trending below our +3.5-4.0% fullyear FY21 growth estimates; as such, we revise it down to +3.0-3.5%, particularly with lingering Covid-19 headwinds.

Softer leading indicators. Loan applications swung to -1.0% YoY (May: +63.6%) as credit demand for HH was weak (-2.7% vs May: +3-fold) but Biz held relatively steady (+1.5% vs May: -5.6%). In a similar way, loans approval moderated further (-0.1% vs May: +80%) with both HH and Biz waning to +19.6% (May: +3-fold) and -16.8% (May: +8.1%) respectively.

Deposits growth lost steam to 3.9% YoY (May: 5.0%), given softer CASA (+14.0% vs May: 16.8%) and tepid FD (-3.2% vs May: -2.6%). Overall, Jun-21’s loan-to-deposit ratio remained fairly flattish MoM at 88% (near to Feb-18’s peak of 89%). In general, deposit taking competition is benign.

Asset quality showed some weakness as gross impaired loans (GIL) ratio nudged up 3bp MoM to 1.62%; this was dragged by the Biz segment (+8bp) while HH stayed rather unchanged (-1bp). We expect to see GIL ratio continue climbing but would not be overly worried as banks have made heavy pre-emptive provisioning in FY20 & we reckon credit risk has been adequately priced in by the market, looking at the elevated NCC assumption used for FY21 by both us & consensus (above the normalized runrate but below FY20’s level). Also, the Government and BNM will remain supportive in helping troubled borrowers, limiting a significant deterioration in GIL ratio.

Interest spread widened. Average lending rate expanded 5bp MoM while the 3-mth board fixed deposit rate was flattish. In turn, the spread broadened by 5bp. We expect net interest margin (NIM) to remain stable, premised on no OPR reduction and benign deposit rivalry in 2021.

Retain OVERWEIGHT. Even with the nationwide lockdown, we remain optimistic on the sector considering: (i) Covid-19 vaccination rollout, (ii) undemanding valuations (at -1.0SD 5-year mean P/B), and (iii) ample market liquidity (which we believe will soon again motivate ‘risk on’ appetite into stocks with recovery, reopening, and deep value traits). Hence, any selldown is an opportunity to accumulate, in our opinion. For largesized banks, we like Maybank (TP: RM9.40) for its strong dividend yield, and Public Bank (TP: RM4.50) for its defensive qualities, over CIMB (TP: RM4.60). For mid-sized banks, RHB (TP: RM6.85) is favoured more than AMMB (TP: RM2.85) as the former has a higher CET1 ratio & also, larger FVOCI reserve to buffer against potential yield curve volatility. For small-sized banks, BIMB (TP: RM5.20) and Affin (TP: RM2.15) are preferred over Alliance (TP: RM2.60); we like the former given its positive long-term structural growth drivers and better asset quality while the latter has value unlocking potential.

Source: Hong Leong Investment Bank Research - 2 Aug 2021

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Chart Stock Name Last Change Volume 
MAYBANK 8.15 0.00 (0.00%) 7,072,100 
PBBANK 4.24 +0.01 (0.24%) 6,765,800 
RHBBANK 5.70 0.00 (0.00%) 5,201,100 
BIMB 3.25 -0.02 (0.61%) 230,700 
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ABMB 2.77 0.00 (0.00%) 854,300 

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