HLIB 'overweight' on banking sector

Hong Leong Investment Bank (HLIB) is 'overweight' on the banking sector
as loans growth slowed to 10.6 per cent year-on-year in March, compared
with 11.4 per cent on large business repayments.

"The average
lending rate was flattish over the last three quarters but asset
quality improved and remained strong," it said in its research note
today.

It said the competitive pressure on margin and a
potential global recession would increase the possibility of rise in
delinquencies.

"Target prices are being raised 7.1 to 9.5 per
cent as we roll forward the valuation base year to 2014, given the
positive equity undertones and our stance that investors should look
ahead for continue earnings growth," HLIB added.

Meanwhile,
Alliance Research said the lending indicators remained in a negative
trajectory in March compared with the corresponding period last year,
reaffirming its investment thesis that both lenders and borrowers were
turning cautious with the impending 13th General Election.

"We
maintain our 'neutral' recommendation for the sector and RHB Cap serves
as our top pick of the sector, as we believe its current low valuation
is no longer justified," it said in its research note.

It said
the recommendation is in the view of the general election as any
potential change in the political landscape, could disrupt the
execution of projects under the Economic Transformation Programme and
the implementation of policy reform going forward.

"So far, we
observe that loan growth momentum has decelerated in the first quarter,
which is supportive of our investment thesis," it added.-- Bernama