The Malaysian banking sector is generally expected earnings for 2H23 to be weaker HoH primarily due to the assumption of weaker non-interest income (NOII) during the period.
Maybank Investment Bank (Maybank IB) said today (Nov 22) that they project an aggregate core net profit growth of 9.6% in 2023 and 6% in 2024.
Valuations, however, are attractive with most stocks trading more than -1SD below their long-term mean valuations.
Moreover, dividend yields for the sector average a decent 5%. POSITIVE maintained, with BUYs on CIMB, PBK, HLBK, HLFG and ABMB.
Expecting softer HoH earnings
To recap, 1H23 saw an aggregate core net profit for banks in under Maybank IB’s coverage jump 22% YoY, supported mainly by robust NOII, lower credit cost and the absence of Cukai Makmur, which more than offset the hefty compression in margins.
Maybank IB is, however, imputing a softer 2H amid lower NOII assumptions and expect 2H23 cumulative core net profit to contract 4% HoH (-1% YoY).
For 2023, they expect core net profit to expand 9.6% YoY and project a growth of 6% in 2024E.
The aggregate core earnings growth for our banks covered by Maybank IB averaged about 4% over the past 10 years i.e. from 2013-2022.
Valuations, however, are attractive…
Maybank IB said stocks within their coverage currently trade at a 1-year forward average 2024E PER of 9.2x against a -1SD to mean of 10.1x.
Valuations are closer to the COVID low of 8.3x that the sector registered in Oct 2020, which is not justified, in their view, given the resumption in earnings growth.
With the exception of MAY, BIMB and RHB, all other stocks are trading more than -1SD below their mean 1-year forward PER valuations.
Valuations, in fact, continue to be attractive across the sector. MAY, BIMB and RHB continue to trade below their long-term mean valuations.
…as are dividend yields
Dividend payout ratios (DPRs) have generally returned to, if not exceeded, pre-COVID levels.
Dividend yields for the sector presently average about 5%, with CIMB and RHB offering more than 5.5% for FY23E and ABMB, BIMB and MAY offering 6% or more, Maybank IB added.
