RHB Investment Bank Bhd (RHB Research) anticipates that Malaysian banks will gain from structural reforms, long-term themes, and economic masterplans.
The firm claimed that while short-term beneficiaries will continue to draw investor interest, banks are expected to gradually experience broader benefits.
“Amid normalising sector earnings growth, we prefer stocks that offer above-average earnings and/or dividend growth, such as CIMB Group Holdings Bhd and AMMB Holdings Bhd (Ambank Group),” the firm said in a note.
The global monetary easing cycle is also expected to provide relief to regional banks, according to RHB Research. Indonesian banks are likely to benefit from reduced funding cost pressures, while Thai banks may see an improvement in asset quality.
“Bank Negara Malaysia (BNM) is expected to stand pat, and hence, Malaysian banks appear largely neutral.
“For Singaporean banks, as long as the easing in rates is gradual, there should be sufficient levers to help cushion net interest margin (NIM) pressure,” it added.
RHB Research pointed out that the yield theme will continue to drive performance, with the upcoming second-quarter (2Q) reporting season coinciding with dividend payments by banks in Singapore, Thailand, and Malaysia. This could lead to strong third-quarter (3Q) performance in terms of total returns.
Moreover, the firm added that in a moderating sector earnings growth environment, investors are gravitating towards dividend-yielding stocks.
“Fundamentally, NIM and asset quality will likely remain key areas of focus across the region in the upcoming results, especially in Indonesia and Thailand.
“In Malaysia and Singapore, non-interest income should be the key swing factor for sector earnings trends, while asset quality looks under control,” it said.
RHB Research expressed a preference for Malaysian banks due to their stronger growth prospects and more attractive valuations. Both Singaporean and Malaysian banks are expected to offer decent yields to investors.
Affin Bank Bhd stands out for its individual stock returns year-to-date (YTD), driven by the anticipation of a new major shareholder significantly impacting the group.
Moreover, CIMB and DBS Bank were also noted for their strong YTD performance, attractive yields and potential for further capital management initiatives. – July 18, 2024
