RHB Research has an “Overweight” recommendation on the Banking sector with its preferred pick Hong Leong Bank, AMMB, and Malayan Banking as its preferred picks.
Banks are up c.9% YTD, with the outperformance against the market benchmark (-1% YTD) reflecting the sector’s relatively defensive attributes and the country’s gradual economic recovery.
It said that underlying momentum is healthy going into 2Q22, and banks struck a cautious tone on business growth and asset quality.
RHB said that it forecast sector earnings improving by 5.4% YoY in 2022, relatively unchanged post-1Q22 results, with ROE stable at 9.4%
It said that of the eight banks under its coverage, five had results that were in line. AMMB and CIMB posted earnings that beat our expectations on lower-than-expected impairment charges and recognition of tax credits at AMMB.
It said that Bank Islam Malaysia (BIMB) missed expectations for the second consecutive quarter, attributed to weaker-than-expected non-financing income.
On the loan growth, it said that the sector loans grew 1.7% YTD in 1Q22 or an annualised 6.8%. Demand for credit is healthy as evident by the 12% growth in banking system loan approvals for Jan-Apr 2022 and banks’ confirmation of strengthening business momentum with the gradual recovery in Malaysia and the opening of international borders.
It said that with headwinds from rising inflation, geopolitical tensions, and the lingering COVID-19 pandemic, banks maintained their guidance for 5-6% loan growth in 2022.
