Introduction
The Malaysian banking sector has shown promising growth in the third quarter of 2024, exhibiting an impressive 11% year-on-year increase in earnings. This growth is primarily fueled by lower provisions and a robust surge in non-interest income, particularly from forex and treasury gains. As the sector aligns with the 8% growth estimates for the year, UOB Kay Hian maintains a MARKET WEIGHT stance, focusing on laggards like RHB, Hong Leong Bank, and Public Bank for a more favorable risk-reward balance.
Affin Bank
Affin Bank has demonstrated a remarkable 45% year-on-year growth in net profit, reaching RM146 million in 3Q24. The bank excelled due to significant gains from provision writebacks. However, the recommendation for Affin Bank is a SELL, with a target price of RM2.39. The bank’s shares have appreciated by 40.4% year-to-date, indicating a potential overvaluation in the current market.
Alliance Bank
Alliance Bank reported a modest 2.4% year-on-year increase in net profit, totaling RM190 million. The bank’s performance was in line with expectations, showing a 7.5% quarter-on-quarter growth. The recommendation for Alliance Bank is HOLD, with a target price of RM4.84. The bank’s shares have seen a 44.5% year-on-year increase, reflecting a stable growth trajectory.
AMMB
AMMB exceeded expectations with a 6.6% year-on-year increase in net profit, amounting to RM501 million. The bank’s stronger-than-expected net interest margin contributed to its outperformance. The recommendation for AMMB is HOLD, with a target price of RM5.74. Shares have risen by 39.4% year-to-date, indicating robust investor confidence.
Bank Islam (BIMB)
Bank Islam faced challenges in 3Q24, with a 7.2% year-on-year decline in net profit to RM130 million. The bank lagged due to higher financing allowances and finance costs. The recommendation is HOLD, with a target price of RM2.38. The bank’s shares have increased by 19.5% year-to-date, reflecting moderate growth potential.
CIMB Group
CIMB Group’s net profit rose by 10.5% year-on-year to RM2,030 million, aligning with expectations. The bank’s steady performance is attributed to strong foreign inflows and stable earnings. The recommendation is HOLD, with a target price of RM8.12. Shares have appreciated by 41.4% year-to-date, showcasing strong market performance.
Hong Leong Bank
Hong Leong Bank reported a 5.8% year-on-year increase in net profit, reaching RM1,090 million. The bank’s performance was in line with market expectations. The recommendation is BUY, with a target price of RM23.60. Shares have appreciated by 8.5% year-to-date, indicating a stable growth outlook.
Maybank
Maybank’s net profit increased by 7.6% year-on-year to RM2,538 million, meeting market expectations. The bank is recommended as HOLD, with a target price of RM10.56. The bank’s shares have seen a 13.8% year-on-year increase, reflecting steady growth.
Public Bank
Public Bank exceeded expectations with a 12.4% year-on-year increase in net profit to RM1,913 million. The recommendation is BUY, with a target price of RM5.35. The bank’s shares have risen by 7.5% year-to-date, indicating strong investor interest.
RHB Bank
RHB Bank showed an impressive 28.2% year-on-year increase in net profit, totaling RM833 million. The bank’s performance was supported by strong non-interest income and lower provisions. The recommendation is BUY, with a target price of RM7.30. Shares have increased by 20.9% year-to-date, reflecting a robust growth outlook.
Conclusion
The Malaysian banking sector presents a mixed outlook, with several banks showing robust growth and others facing challenges. The focus remains on laggards like RHB, Hong Leong Bank, and Public Bank for a better risk-reward balance. Investors are advised to consider these recommendations while keeping an eye on sector dynamics and macroeconomic factors.
