GE13: Malaysian banks to catch up with regional peers

KUALA LUMPUR: Malaysian banks are expected to play catch-up with
regional peers as the removal of the political overhang from the 13th
General Elections should lead to lower risk premiums, says RHB Research.
"We
believe the subdued performances of local banking stocks have largely
been due to uncertainties arising from the general election as
fundamentally, we see no change to the sector's prospects," it said on
Monday.
RHB Research said its Overweight stance was unchanged.
However, to reflect the lower risk premiums, it raised its target CY13
price-to-earnings ratio (PER) multiples to between 10 times and 15 times
from between 9.0 times and 14 times.
RHB Research said the
confluence of factors such as inexpensive valuations, heavyweight sector
and ample liquidity in the system means that the sector should not be
ignored, especially for funds benchmarked to domestic indices. Its top
picks were CIMB, AMMB and Maybank, in order of preference.
It
also pointed out with the general election uncertainties removed, loan
demand from the business segment is expected to pick up and it would
benefit the banks.
"As seen from the recent banking statistics,
business loan growth has slowed down to up 8.7% on-year (on-year in
February 2013 from up 14.4% on-year in July 2012 as businesses (and
especially government-linked companies) adopted a 'wait-and-see'
stance," it said.
RHB Research said as the general election
results were in favour of Barisan National, the results would ease the
risks of cancellations and changes to the terms of big-ticket projects,
and also help remove uncertainties that might have impacted investment
spending decisions by businesses.
On Malaysian banking stocks, RHB
said Malaysian banking stocks lagged regional peers in terms of share
price performance, up 3.7% year to date (YTD) (weighted average),
compared to regional banking stocks.
"Indonesia banks have been
the best performer YTD with the big cap banks up an average 23% while
the large Thai banks and Singapore banks are up 14.5 to 15.5% YTD," it
said.