Kenanga: Banks will continue to outperform

KUALA LUMPUR: Kenanga Research expects the banking
sector will
continue to outperform the local banking groups seen to do well in the
current conducive banking system given the strong balance sheets and
improving earnings.

Kenanga said its focus continued to remain
on two key themes -- "Economic Transformation Programme (ETP)-optimism
in banking" and "dark horses in the sector".

Under the
ETP-optimism in banking theme, Kenanga likes the CIMB Group Holdings
Bhd and Malayan Banking Bhd over the prospect of their wholesale
banking growth.

Meanwhile, the research house continues to see
BIMB Holdings Bhd and Affin Holdings Bhd as the potential "dark horses"
in the sector as they would benefit from their current corporate
actions that could be a re-rating catalyst for their share prices.

"The
wide valuation gap of the smallest banks, Affin and BIMB, against the
rest of the sector could see catch-up plays on their stocks as the
sector rally continues," it said in a research note.

However,
Kenanga viewed with concern the pressure of lower net interest margins
on banks' earnings which could dampen sentiments on banking stocks as a
risk.

The research house also expects the momentum in merger and acquisitions (MandA) in the sector to remain strong.

"Transforming
a slow growth in consumer-lending into a fast-growth, banks require
securing the investments necessary for tomorrow's faster growth and in
the race ahead, whichever pulls ahead was apt to stay ahead," it said.

Kenanga
said investors should look at the non-banking financial sector too as
well to ride on the MandA theme and this was positive news for the
general insurance and stock broking industry which would likely
experience the next MandA wave in the financial sector. -- BERNAMA