Malaysian Banks
Top 3 themes for 2014

Three impactful themes: (1) Back to domestic-focused banks, (2) High quality laggards, (3) Balance Sheet Optimisation. Earnings growth riding on M&A revenue accretion; loan growth will be business driven amid weaker consumer sentiment from fiscal tightening measures. PBK and HLB are our new top picks for the sector.

AMMB Holdings; Hold; RM7.32
Price target: RM7.50; AMMB MK
Expanding non-interest income

Below-industry loan growth. Acquisitions (Kurnia and MBF Cards) gaining traction to lift non-interest income. Maintain HOLD and RM7.50 TP.

BIMB Holdings; Hold; RM4.49
Price target: RM4.30; BIMB MK
Banking on Syariah finance

Efficient group structure to set the stage for future M&As. Softer growth prospects for consumer loans should keep share performance range-bound. Maintain HOLD, RM4.30 TP.

CIMB Group Holdings; Hold; RM7.62
Price target: RM8.10; CIMB MK
Softer outlook; banking on IB platform

Enlarged IB platform to deliver value. Slower growth in Indonesia due to macro headwinds could lead to downside risk in Niaga. Maintain HOLD; RM8.10 TP.

Hong Leong Bank; Buy; RM14.30
Price target: RM18.00; HLBK MK
Strong growth platform

Revving domestic momentum with strong platform for further growth. Regional expansion is an added earnings kicker. Maintain BUY rating and RM18.00 TP.

Hong Leong Financial Group; Buy; RM15.32
Price target: RM18.80; HLFG MK
Corporate streamlining potential

Potential privatisation could re-rate HLFG; in our view HLB will remain listed as it is the key operating entity driving group profits. HLA is an IPO candidate once its insurance business turns sizeable; valuing HLA at 2.0x BV could add RM1.00 to our SOP-based TP for HLFG. Maintain BUY and RM18.80 TP.

Maybank; Buy; RM9.93
Price target: RM11.80; MAY MK
Dividend still a sweet spot

Near term headwinds in Indonesia has minimal impact; Singapore and Philippines are growth boosters. Regional franchise remains on agenda; regionalizing consumer banking in 2014. High dividends (5% yield) still a sweet spot; Maintain BUY.

Public Bank; Buy; RM19.08
Price target: RM23.00 (Prev RM18.00); PBKF MK
Premium has its value

Upgrade to BUY; lifted TP to RM23.00. Mass market portfolio will defy headwinds in consumer segment. Sustainable earnings backed by stable loan growth, robust asset quality and best in class cost-to-income ratio.

RHB Capital; Buy; RM7.99
Price target: RM8.80; RHBC MK
Temporary overhang

IB business to drive non-interest income; asset quality remains a concern. Potential restructuring is a re-rating catalyst. Share price overhang will disappear once credit costs concern is addressed; maintain BUY.

Source: HwangDBS Research - 6 Jan 2014