RHBank and AMMB have agreed to call off the proposed merger. As the merger was viewed negatively for the lack of overall synergies, this news could temporarily lift sentiment of both stocks. However, current valuations for RHBBank and AMMB at 0.85x P/B fairly reflect their respective ROE of 8.1% and 8.3%. Maintain SELL on RHBBank (Target: RM4.65) as provision risk remains a concern, and HOLD for AMMB (Target: RM4.90). Maintain MARKET WEIGHT on the sector.

Source: UOB Kay Hian Research - 23 Aug 2017