RHBIB raises banking sector recommendation from “neutral” to “overweight”

KUALA LUMPUR, Sept 9 (Bernama) — RHB Investment Bank Bhd (RHBIB) earlier raised its rating on the banking sector from “neutral” to “overweight” and its preferred picks were AMMB, Public Bank, Hong Leong Bank and Alliance Bank Malaysia.

In a research note, RHBIB opined that markets could go through a period of volatility, with upcoming events such as the US presidential election and the US federal funds rate (FFR) cut cycle likely to result in continued volatility.

“The Malaysian banks we cover could offer investors a defensive haven, supported by stable earnings with room to grow on further inflows from foreign institutional investors (FIIs) and earnings upside if banks’ optimism about the outlook proves to be correct,” the research firm said.

Foreign financial institutions became net buyers of domestic equities, with year-to-date (YTD) net inflows of around USD 866 million.

However, it may still be too early to tell as foreign investors are still enthused by Malaysia’s steady economic growth, domestic reforms and thematic games.

Banks, being liquid large-cap companies, are most likely to be the beneficiaries of FII capital inflows, the report said.

Meanwhile, RHBIB said the main change to its recommendation was a downgrade of CIMB from “buy” to “neutral” as the company has seen a strong share price performance this year and the potential upside is now more moderate.

“We continue to expect the sector to post net profit growth of around six per cent per annum in FY2024-26, driven by a rebound in net interest income (NII) as net interest margin (NIM) stabilises and credit expansion continues.

“We expect net interest income to stabilize in 2024 after declining by 24 basis points (bps) year-over-year (y/y) in 2023, and despite a mild slowdown in credit growth, net interest income should recover from the decline in 2023,” the release reads.

It was also assumed that control and credit costs (CoC) would remain more or less stable in the future.

“For now, despite a strong start to the non-II sector, we continue to assume non-interest income (non-II) sector growth to moderate at six per cent year-on-year (2023: 28 per cent), with fees helping to cushion the moderation in non-fee income growth,” RHBIB said.

She added that downside risks to the ratings would come from a weaker-than-expected net income and/or non-II result; higher-than-expected operating expenses resulting from inflation, business expansion and technology spending, which could also lead to a weaker-than-expected net income.

— BERNAMA

---

BERNAMA provides up-to-date, reliable and comprehensive news and information which is distributed through BERNAMA Wires; www.bernama.com; BERNAMA TV on Astro 502, unifi TV 631 and MYTV 121 channels and BERNAMA Radio on FM93.9 (Klang Valley), FM107.5 (Johor Bahru), FM107.9 (Kota Kinabalu) and FM100.9 (Kuching).

Follow us on social media:
Facebook: @bernamaofficial, @bernamatv, @bernamaradio
Twitter: @bernama.com, @BernamaTV, @bernamaradio
Instagram: @bernamaofficial, @bernamatvofficial, @bernamaradioofficial
TikTok: @bernamaofficial