KUALA LUMPUR: According to Kenanga Research the impact to banks could be fairly neutral in the short-term.

"This is despite a few interesting developments of late, which could change the landscape of the banking industry in the long-run.

"All in all, we are maintaining our 'neutral' call in the banking sector, despite fairly decent valuations," said the research house in its research note today.

Kenanga noted that the sector is trading at 11.8 times to its current year 2014 numbers compared to FBMKLCI which is more than 16 times.

Our unchanged concerns are potential moderating in loans growth, continuing decline in NIM, potentially weaker non-interest income due to higher uncertainties in capital market, and potential hike in credit cost.

We are maintaining our 'market perform' calls on Affin (TP: RM4.60), Ambank (TP: RM8.10), BIMB (TP: RM4.74), CIMB (TP: RM8.10), HLBANK (TP: RM15.20) and PBBANK (TP: RM18.20).

It noted that CIMB has now become fairly valued compared to being undervalued in late Dec 2013 after taking account into the recent 500 million new share placement into consideration.

Meanwhile, Kenanga said its 'outperfom's picks are AFG (TP: RM5.62), Maybank (TP: RM10.40) and RHBCap (TP: RM8.75).

"We continue to see value in RHBCap, hence making it our Top Pick for Q1 of 2014."