Banks - 4Q14 review: not the time to cheer
Recommendation: Under Weight
The recovery of net earnings growth to a strong 10.5% yoy in 4Q14 for the banks under our coverage failed to excite us because it was mainly spurred by an unsustainable net write-back in loan loss provisioning. Overall, banks’ 4Q14 results were within expectations. In 2015, we see headwinds for banks arising from (1) continuous margin contractions, (2) a slowdown in loan growth, and (3) an expected upturn in credit costs. The above are the de-rating catalysts for us to maintain our Underweight call on banks. RHB Capital is still our top pick.
In 2015, we see headwinds for banks arising from (1) continuous margin contractions, (2) a slowdown in loan growth, and (3) an expected upturn in credit costs. The above are the de-rating catalysts for us to maintain our Underweight call on banks. RHB Capital is still our top pick.
Better 4Q net profit growth
The total net profit of banks under our coverage (excluding BIMB) rose by a strong 10.5% yoy in 4Q14 vs. a marginal 0.1% yoy drop in 3Q14. This was mainly driven by a (1) net write-back of RM66.5m in 4Q14 LLP, and (2) stronger 9.9% non-interest income expansion.
7.8% net earnings growth in 2015
We are projecting a net earnings growth of 7.8% for Malaysian banks (including BIMB) in 2015, on par with the level in 2014. This would be supported by increases of 7% in net interest income and 18.8% in non-interest income but LLP is expected to shoot up by 70%.
Faster loan growth
The industry’s loan growth accelerated from 9% yoy in Sep 14 to 9.3% yoy in Dec 14 but the 9% loan expansion for 2014 was still slower than the 10.6% recorded in 2013. Compared to Sep 14, the improvement in Dec 14 mainly came from the business loan segment, but growth in consumer loans eased from 10.7% yoy in Sep 14 to 9.9% yoy in Dec 14.
Lower gross impaired loans
Despite the pressure from higher inflation, the industry’s gross impaired loan ratio improved from 1.8% in Sep 14 to 1.7% in Dec 14 while the net impaired loan ratio stayed at 1.3% in Sep-Dec 14. Loan loss coverage also rose from 101.7% in Sep 14 to 106.3% in Dec 14, the highest in the past 1-2 decades.
Source: CIMB Daybreak - 13 March 2015
Recommendation: Under Weight
The recovery of net earnings growth to a strong 10.5% yoy in 4Q14 for the banks under our coverage failed to excite us because it was mainly spurred by an unsustainable net write-back in loan loss provisioning. Overall, banks’ 4Q14 results were within expectations. In 2015, we see headwinds for banks arising from (1) continuous margin contractions, (2) a slowdown in loan growth, and (3) an expected upturn in credit costs. The above are the de-rating catalysts for us to maintain our Underweight call on banks. RHB Capital is still our top pick.
In 2015, we see headwinds for banks arising from (1) continuous margin contractions, (2) a slowdown in loan growth, and (3) an expected upturn in credit costs. The above are the de-rating catalysts for us to maintain our Underweight call on banks. RHB Capital is still our top pick.
Better 4Q net profit growth
The total net profit of banks under our coverage (excluding BIMB) rose by a strong 10.5% yoy in 4Q14 vs. a marginal 0.1% yoy drop in 3Q14. This was mainly driven by a (1) net write-back of RM66.5m in 4Q14 LLP, and (2) stronger 9.9% non-interest income expansion.
7.8% net earnings growth in 2015
We are projecting a net earnings growth of 7.8% for Malaysian banks (including BIMB) in 2015, on par with the level in 2014. This would be supported by increases of 7% in net interest income and 18.8% in non-interest income but LLP is expected to shoot up by 70%.
Faster loan growth
The industry’s loan growth accelerated from 9% yoy in Sep 14 to 9.3% yoy in Dec 14 but the 9% loan expansion for 2014 was still slower than the 10.6% recorded in 2013. Compared to Sep 14, the improvement in Dec 14 mainly came from the business loan segment, but growth in consumer loans eased from 10.7% yoy in Sep 14 to 9.9% yoy in Dec 14.
Lower gross impaired loans
Despite the pressure from higher inflation, the industry’s gross impaired loan ratio improved from 1.8% in Sep 14 to 1.7% in Dec 14 while the net impaired loan ratio stayed at 1.3% in Sep-Dec 14. Loan loss coverage also rose from 101.7% in Sep 14 to 106.3% in Dec 14, the highest in the past 1-2 decades.
Source: CIMB Daybreak - 13 March 2015
