Maybank IB Research continued to have a positive stance on the banking sector.
PETALING JAYA: The better-than-anticipated economic growth numbers for the second quarter appear to have fuelled strong gains for banking or financial services stocks.
Recent earnings of the sector appeared to have also met analysts expectations.
Their earnings for the rest of the year are expected to largely track the gross domestic product growth forecasts of the country, given that they are a proxy to the economy, according to the analysts.
CGS-International Research said financial services earnings were at 9% year-on-year (y-o-y).
But the research house noted that the overall sector trends and management commentary pointed towards an improving loan growth, stable to better margins and strong fee income growth.
Maybank Investment Bank (IB) Research, in its note, said the recent second quarter reporting season showed a decent quarter for the banks.
“The cumulative first half 2024 core net profit rose 9% y-o-y.
“Moving into 2025, we project aggregate core net profit growth of 6.1%, supported by still fairly decent loan growth of 5.5%, net interest margins expansion and marginally lower credit costs, mitigated in part by lower non-interest income,” the research house said.
Maybank IB Research continued to have a positive stance on the banking sector.
It downgraded Alliance Bank Malaysia Bhd
to a “hold” and upgraded RHB Bank Bhd to a “buy.”
Maybank IB Research’s “buy” calls in the order of preference are AMMB Holdings Bhd, CIMB Group Holdings Bhd, Public Bank Bhd, RHB Bank, Hong Leong Bank Bhd and Hong Leong Financial Group Bhd (HLFG).
“We maintain our aggregate operating profit growth forecast of 7.6% y-o-y. Our key assumption is a 5.5% domestic loan growth, amongst others.
“We have raised our projected core net profit growth to 7.8% from 6.8%, supported by a lower credit cost and project an average return on equity of 10.4% for the banks in our coverage,” it said.
“With the exception of Bank Islam Malaysia Bhd (BIMB) and HLFG, all other banks reported results that were within expectations. HLFG surprised positively due to better contributions from its investment bank, while BIMB disappointed due to lower non-fund based income and faster-than-expected overheads growth,” it added.
The research house also noted that deposit growth in the system which lagged slightly to loan growth which expanded 4% y-o-y as at end-June 2024, against group loan growth of 7.2%.
As a result, the average loan to deposit ratio was higher at 94.2% as of end-June 2024 compared with 92.6% as at end-March 2024.
Positively, current account savings account continued to expand at a faster pace than deposits which expanded 8.1% y-o-y and had generally assisted in moderating funding costs.
