KUALA LUMPUR: CIMB Equities Research is retaining its Underperform rating on Hong Leong Bank as it sees challenges in its integration with EON Bank, including management distraction and possible attrition of key managers/clients.
It said on Friday, Sept 30 that credit cost could rise to restore loan loss coverage after the merger.
"We cut our FY12-14 net earnings forecasts by 4%-12% to factor in the rights issue, which would lead to a 19% increase in its share base."
"This, together with the withdrawal of the 10% premium over the DDM value, brings down our target price from RM13.50 to RM10.80. We prefer Maybank (Outperform) for exposure to the sector," it said.