RHB Research keeps Maybank, Public Bank as top picks

KUALA LUMPUR: RHB Research Institute is keeping Maybank and Public Bank as its top picks but maintains a neutral stance on the banking sector.

In its banking sector quarterly results analysis issued on Tuesday, it said the results of the banks were slightly ahead of its expectations in the recent Q1, 2012 reporting quarter.

RHB Research said two banks reported stronger-than-expected results mainly due to lower-than-expected loan impairment allowances while the remaining five banks reported results that were within expectations.

“As compared to consensus, Affin's results were ahead of expectations while the rest were in line. The trends were similar with the previous quarter, with lower-than-expected loan impairment allowances being the key variance to the stronger-than-expected results,” it said.

RHB Research said the positive trends during the quarter were: 1) healthy non-interest income, supported by strong investment and trading income; 2) overheads under control with CIR stable at 46.7%; 3) decline in loan impairment allowances with credit cost down 2 basis points on-quarter to 6bps (1QCY11: 4bps); and 4) asset quality remained intact.

It pointed out the main negative was soft net interest income growth due to a combination of: 1) weak loan growth (Q1, 2012: +0.8% on-quarter; +12.4% on-yeary); and 2) 14bps on-quarter NIM squeeze (-11bps on-yeary) as NIM plunged to a new low of 2.56% mainly due to downward pressure on asset yields.

“Generally, there were no major downward revisions in targets with the banks expecting H2, 2012 to be a stronger period, supported by the ETP.

“Maintain Neutral stance on the sector with Maybank and Public Bank as our top picks,” it said.