Banks : Stay underweight on Malaysian banks, says CIMB Research
KUALA LUMPUR: CIMB Equities Research is maintaining its Underweight stance on Malaysian banks after the three consecutive quarters of weak earnings.
It said on Tuesday it continues to rate Malaysian banks as Underweight given the earnings risks of margin contractions, upturn in credit costs, and unattractive valuations. Maybank is its top pick.
Despite the positive impact of the rate hike, the banks’ net profit fell 2% on-year in 3Q14, impacted by an 8.2% on-year drop in non-interest income.
The margin contraction also limited the expansion in net interest income to only 5% on-year in 3Q14. On a positive note, 3Q14 overheads rose by only 2.7% on-year while loan loss provisioning fell by 1.1% on-year, it said.
“We are projecting a net profit growth of 6.8% for Malaysian banks in 2014, supported by increases of 5.7% in net interest income and 11.6% in non-interest income.
“If we exclude several non-recurring boosters in 2014, net earnings growth will be even be weaker at only 3.7%,” it said.
CIMB Research said the industry’s loan growth eased marginally from 9.3% on-year in June 2014 to 9% on-year in September 2014.
By segment, consumer loan momentum eased from 11.5% on-year in June 2014 to 10.7% on-year in September 14 but business loan growth picked up slightly from 6.5% on-year to 6.7% on-year in the same period.
The research house said banks’ asset quality did not deteriorate under the heat of higher inflation. The industry’s impaired loan ratios stayed at 1.3% net and 1.8% gross in June-September 2014. Although loss coverage slid from 105% in June 2014, it remained strong at 102.2% in September 2014.
http://www.thestar.com.my
KUALA LUMPUR: CIMB Equities Research is maintaining its Underweight stance on Malaysian banks after the three consecutive quarters of weak earnings.
It said on Tuesday it continues to rate Malaysian banks as Underweight given the earnings risks of margin contractions, upturn in credit costs, and unattractive valuations. Maybank is its top pick.
Despite the positive impact of the rate hike, the banks’ net profit fell 2% on-year in 3Q14, impacted by an 8.2% on-year drop in non-interest income.
The margin contraction also limited the expansion in net interest income to only 5% on-year in 3Q14. On a positive note, 3Q14 overheads rose by only 2.7% on-year while loan loss provisioning fell by 1.1% on-year, it said.
“We are projecting a net profit growth of 6.8% for Malaysian banks in 2014, supported by increases of 5.7% in net interest income and 11.6% in non-interest income.
“If we exclude several non-recurring boosters in 2014, net earnings growth will be even be weaker at only 3.7%,” it said.
CIMB Research said the industry’s loan growth eased marginally from 9.3% on-year in June 2014 to 9% on-year in September 2014.
By segment, consumer loan momentum eased from 11.5% on-year in June 2014 to 10.7% on-year in September 14 but business loan growth picked up slightly from 6.5% on-year to 6.7% on-year in the same period.
The research house said banks’ asset quality did not deteriorate under the heat of higher inflation. The industry’s impaired loan ratios stayed at 1.3% net and 1.8% gross in June-September 2014. Although loss coverage slid from 105% in June 2014, it remained strong at 102.2% in September 2014.
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