HwangDBS positive on Hong Leong Bank

Hong Leong Bank (HLB) which is riding high on synergies, will see its net interest margin (NIM), trend up in financial year 2012 with the full consolidation of EON Bank's higher yielding loans, says HwangDBS Vickers Research.

Subsequently, the NIM would trend down due to competitive pressure along with an estimated 20 per cent discount for the rights issue, implying post-rights Return On Equity to hover at 16 per cent, it said.

In a research note today, HwangDBS expects the pricing of HLB's RM2.6 billion rights issue details to be out by next week.

"HLB, a defensive stock with strong post-merger growth will reap good synergies from the EON merger, via improves efficiencies, higher NIMs, and a larger presence in hire purchasing and small and medium enterprises (SMEs).

"One of the key levers is the business banking unit that focuses on SMEs, which is now more scalable with EON's base," the research house added.

HwangDBS remained positive on HLB and maintained a "buy" call. -- Bernama