Date: 1st October 2024
Broker: UOB Kay Hian

Market Performance

Hong Leong Bank is recommended as a “Hold” with a target price of RM23.60, while it is currently trading at RM21.56. The bank has experienced a year-to-date increase of 15.5% and a year-over-year change of 10.8%. This indicates solid performance amid a competitive banking landscape.

Earnings and Growth Potential

The bank’s earnings growth is projected to be moderate at 10.8% for 2024. Despite this, Hong Leong Bank is highlighted as a potential beneficiary of credit cost tailwinds, which could enhance its profitability in the upcoming periods.

Asset Quality and Stability

The report notes that asset quality for Hong Leong Bank remains stable. The bank has maintained a strong position in managing its gross impaired loans (GIL) ratio, which reflects its ability to navigate potential challenges in the broader economic environment.

Strategic Positioning

Hong Leong Bank is positioned to benefit from improvements in credit costs, which could arise from a favorable macroeconomic backdrop. The bank’s strategy focuses on enhancing its loan portfolio quality and maintaining a balanced approach to growth and risk management.

Sector Context

Within the context of the banking sector, Hong Leong Bank is viewed positively due to its current valuation being 1 SD below its historical mean price-to-book ratio. This positioning offers an attractive risk-reward balance for investors looking for stability in a fluctuating market.

Analyst Coverage

The analysis has been conducted by Keith Wee Teck Keong from UOB Kay Hian, emphasizing Hong Leong Bank’s resilience and strategic advantages in the current banking sector environment.