Loans and deposits growth gained traction to 6.8% and 7.5% YoY respectively. Also, leading indicators remained robust and asset quality held steady. As for NIM, we expect it to broaden from OPR hikes but the magnitude may be capped by the downward normalization of CASA mix. Nonetheless, banks are still net beneficiaries of interest rate upcycle. Overall, we continue to view positively the banking sector and also, opine the risk-reward profile is skewed to the upside; the cocktail of robust profit growth and undemanding valuations will be impetus to drive performance. Retain OVERWEIGHT; BUY calls include: Maybank, RHB, BIMB, Affin, Alliance.
Source: Hong Leong Investment Bank Research - 3 Oct 2022
August 2022 system loans grew by 6.8% YoY (+0.7% MoM), beating our expectations. Hence, we raise our CY22 industry growth target to 6.0-6.5%. While better business loans were expected, the continued support from household loans was unanticipated in a rising rate environment.
Maintain OVERWEIGHT on the banking sector. We are further encouraged by the strong loans growth performance, emboldening sector prospects. We continue to anticipate two more 25 bps OPR hikes in the subsequent BNM MPC meetings which could lift banking margins while allaying competitive pricing pressures. This would translate favourably on CY23 earnings, notwithstanding the lapse of CY22’s prosperity tax in addition to higher possibilities of writebacks. For the 4QCY22 season, we feature the following as our top picks :- (i) CIMB (OP; TP: RM6.35) for defensive NOII reporting as trading performances are supported by its regional entities. It also commands on of the highest CASA books amongst the large cap banks. Notably, we have awarded CIMB with a 4-star ESG rating for its sustainable financing efforts; (ii) MAYBANK (OP; TP: RM11.05) which remains our dividend favourite (7-8% yield) and provide shelter for investors preferring more secured returns. As the market share leader in loans and deposits, MAYBANK would also be widely exposed to the benefits of economic reopening.
Ironically, it is the reforms that came out of the last global crisis that have made markets more fragile. Trading across asset classes is thinner and easier to disrupt after U.S. regulators forced banks to pull back from proprietary trading activities, a dynamic that JPMorgan Chase CEO Jamie Dimon has repeatedly warned about.
Regulators did that because banks took on excessive risk before the 2008 crisis, assuming that ultimately they’d be bailed out. While the reforms pushed risk out of banks, which are far safer today, it has made central banks take on much more of the burden of keeping markets afloat.
With the possible exception of troubled European firms like Credit Suisse , investors and analysts said there is confidence that most banks will be able to withstand market turmoil ahead.
The financial turmoil of recent days appeared to be confined to Britain and was not spreading to the global economy, Yellen told reporters at the end of her visit in North Carolina. She declined to comment on Britain’s new budget, the newspaper said.
Yellen said financial markets were “still functioning well”, adding that they “haven’t seen liquidity problems develop in markets”, the report added.
Yellen said that both the US and Britain had “significant inflation problems and central banks are focused on wanting to bring inflation down”.
Meanwhile, in a rising rate environment, it is more like that the banks with the greatest re-pricing power could capitalise on the introduction of higher rates. This would constitute having: (i) a low fixed rate financing mix, and/or (ii) a higher CASA-to-deposit ratio. Notably, BIMB and RHBBANK appear to have the highest variable loans rate profile while ABMB, CIMB and MAYBANK stand tall with CASA.
Maintain OVERWEIGHT on the banking sector. The investment thesis for the banking sector’s resiliency remains affirmed and we believe additional attention could be given to names which demonstrate stronger performance thanks to the factors mentioned above.
( we believe additional attention could be given to names which demonstrate stronger performance thanks to the factors mentioned above. )
MAYBANK (OP; TP: RM11.05) continues to be a favourite for dividends (7-8% yield) for those concerned with capital safety amidst ongoing uncertainties.
In a statement, Maybank said it was named the ‘Most Outstanding Company in Malaysia – Banking Sector’ for the second consecutive year under Asiamoney’s annual Asia’s outstanding companies poll.
Close to 1,000 fund managers, buy-side analysts, bankers and research analysts were polled for companies listed across 12 markets in Asia, with 175 companies recognised for their outstanding performance in their respective sectors and markets.
Maybank also received three awards under Asiamoney’s Best Bank Awards in 2022 namely Best Bank for Diversity & Inclusion in Malaysia, Best Investment Bank in Malaysia (Maybank Investment Bank) and Best International Bank in Cambodia.
@AqsadMohamad welcome....wise decision, keep for long term, it gives consistent attractive dividend and potential for very good appreciation esp if management can achieve their M25 earning target of above 100 sen per shares in the next few years.
Wow....nice, 5.50 again....investors will definitely get richer over the long term.... .....non investor busy busy trolling...busy busy monitoring the wealth of investors must be very stressed out.....haha....LOL
Buy with a TP of RM10.60 or a PBV of 1.37x derived from a higher applied ROE of 11% (which is below management’s 5-year target of 13-15%.
MAYBANK is our Top Pick for the banking sector for its most favourable risk-to reward with the highest dividend yield in the industry plus solid ROE prospects. MAYBANK hosted a briefing to share its 5-year plan and strategies to achieve planned targets by 2025. Fundamentally, these targets include: (i) sustainable ROEs of 13-15%; (ii) CIR (cost to income ratio) of less than 45%; and (iii) EPS of above 100.0 sen (accounting for future dividend reinvestments). Management also aspires to position the group as a regional ESG leader by driving sustainable financing up to RM50bn in 2025, and to be carbon neutral by 2030.