KUALA LUMPUR: CIMB Equities Research remains OVERWEIGHT on the banks with Public Bank as the biggest beneficiary for the rate hikes.
It said on Wednesday, May 4 that based on its simulation, a 25bp overnight policy rate (OPR) increase would add about 1% to banks' net earnings and should have minimal impact on their loan growth or asset quality.
'The expected 2% increase in banks' net profit due to the expected 50bp rise in OPR reinforces our bullish outlook on Malaysian banks,' it said.
CIMB Research said against this favourable backdrop, it continues to rate Malaysian banks an OVERWEIGHT, predicated on the potential re-rating catalysts of (1) higher investment banking income, (2) better growth prospects for overseas operations, (3) upside potential to its dividend forecasts and (4) potential partial write-back of collective assessments.
'It is difficult to spot the biggest winner in the rate hikes as it largely depends on the pricing strategies of the banks after the rate increases,' it said.
CIMB Research said Alliance and RHB Capital have an edge given their high proportions of floating-rate loans and low-cost deposits though the potential benefits could be offset by their more aggressive pricing of deposits, as was the case last year.
'Our bet is on Public Bank which recorded the widest NIM expansion last year, aided by its disciplined pricing of both loans and deposits. We believe that its increase in FD rates this year will be smaller than the rise in BLR, leading to another round of margin enhancement.
'RHB Capital remains our top pick. RHB Capital continues to top the list of our favourite stocks among the Malaysian banks in view of its favourable earnings outlook due to robust growth of loans and non-interest income,' it said.
It said on Wednesday, May 4 that based on its simulation, a 25bp overnight policy rate (OPR) increase would add about 1% to banks' net earnings and should have minimal impact on their loan growth or asset quality.
'The expected 2% increase in banks' net profit due to the expected 50bp rise in OPR reinforces our bullish outlook on Malaysian banks,' it said.
CIMB Research said against this favourable backdrop, it continues to rate Malaysian banks an OVERWEIGHT, predicated on the potential re-rating catalysts of (1) higher investment banking income, (2) better growth prospects for overseas operations, (3) upside potential to its dividend forecasts and (4) potential partial write-back of collective assessments.
'It is difficult to spot the biggest winner in the rate hikes as it largely depends on the pricing strategies of the banks after the rate increases,' it said.
CIMB Research said Alliance and RHB Capital have an edge given their high proportions of floating-rate loans and low-cost deposits though the potential benefits could be offset by their more aggressive pricing of deposits, as was the case last year.
'Our bet is on Public Bank which recorded the widest NIM expansion last year, aided by its disciplined pricing of both loans and deposits. We believe that its increase in FD rates this year will be smaller than the rise in BLR, leading to another round of margin enhancement.
'RHB Capital remains our top pick. RHB Capital continues to top the list of our favourite stocks among the Malaysian banks in view of its favourable earnings outlook due to robust growth of loans and non-interest income,' it said.
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