Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Banking sector
Maintain underweight: We visited Malayan Banking Bhd (Maybank), Public Bank Bhd and AMMB Holdings Bhd and attended a small group meeting held by CIMB Group Holdings Bhd. We sense cautiousness with respect to the outlook ahead with words and phrases such as 'challenging', 'uncertain', 'lack of visibility' being used to describe next year's outlook. CIMB sounded the most bearish while Public Bank remained optimistic its loan growth would continue to outpace the industry.
With just over two months remaining to the year, 2011 targets were kept unchanged. While the Economic Transformation Programme (ETP) is expected to play a key role in driving growth next year, thus far, the impact from larger ETP projects has yet to kick in. As for the investment banking (IB) pipeline, 3QCY11 was still healthy but the banks were mindful that weakening macro conditions ahead could put a dent in capital market activities. Finally, the banks were unanimous that at this juncture there are no signs of stress on asset quality.
Maybank: While management was comfortable with the loan-to-deposit ratio (LDR) of 90.1% as at end-June 2011, it admitted that asset growth ahead could be crimped if not matched with deposit growth. Already, Maybank is now less keen to match rates offered by some competitors while we understand that the message has been communicated to the overseas subsidiaries that they will need to raise their own funding to grow assets.
CIMB: While it's still early days, CIMB likes the Philippine market due to the potential growth ahead and given that CIMB does not have a presence there. Preference is for a controlling stake. Meanwhile, the IB pipeline has been reasonably healthy, although equity market-related activities have been rather weak.
Public Bank: The bank's LDR of 87% to 88% is not expected to affect loan growth. Continuous efforts will be made to grow core deposits to keep LDR manageable. For Basel III, management thinks Bank Negara Malaysia is unlikely to impose capital requirements that are more stringent than the 9% Common Equity Tier-1 required by the Monetary Authority of Singapore, so the group is unlikely to need any fundraising over the next 12 months.
AMMB: With the employment of its third generation score cards and risk-based pricing, AMMB does not target any particular income segment but is willing to lend as long as the customer is willing to pay. AMMB believes the balance sheet is well-positioned such that the impact of any rate increase or decrease would be largely neutral to the group.
We maintain our 'underweight' call on the sector.'' ' RHB Research Institute, Oct 25
This article appeared in The Edge Financial Daily, October 27, 2011.
Company Name: MALAYAN BANKING BHD
| Research House: RHB | Price Call: SELL | Target Price: 6.84 |
Banking sector
Maintain underweight: We visited Malayan Banking Bhd (Maybank), Public Bank Bhd and AMMB Holdings Bhd and attended a small group meeting held by CIMB Group Holdings Bhd. We sense cautiousness with respect to the outlook ahead with words and phrases such as 'challenging', 'uncertain', 'lack of visibility' being used to describe next year's outlook. CIMB sounded the most bearish while Public Bank remained optimistic its loan growth would continue to outpace the industry.
With just over two months remaining to the year, 2011 targets were kept unchanged. While the Economic Transformation Programme (ETP) is expected to play a key role in driving growth next year, thus far, the impact from larger ETP projects has yet to kick in. As for the investment banking (IB) pipeline, 3QCY11 was still healthy but the banks were mindful that weakening macro conditions ahead could put a dent in capital market activities. Finally, the banks were unanimous that at this juncture there are no signs of stress on asset quality.
Maybank: While management was comfortable with the loan-to-deposit ratio (LDR) of 90.1% as at end-June 2011, it admitted that asset growth ahead could be crimped if not matched with deposit growth. Already, Maybank is now less keen to match rates offered by some competitors while we understand that the message has been communicated to the overseas subsidiaries that they will need to raise their own funding to grow assets.
CIMB: While it's still early days, CIMB likes the Philippine market due to the potential growth ahead and given that CIMB does not have a presence there. Preference is for a controlling stake. Meanwhile, the IB pipeline has been reasonably healthy, although equity market-related activities have been rather weak.
Public Bank: The bank's LDR of 87% to 88% is not expected to affect loan growth. Continuous efforts will be made to grow core deposits to keep LDR manageable. For Basel III, management thinks Bank Negara Malaysia is unlikely to impose capital requirements that are more stringent than the 9% Common Equity Tier-1 required by the Monetary Authority of Singapore, so the group is unlikely to need any fundraising over the next 12 months.
AMMB: With the employment of its third generation score cards and risk-based pricing, AMMB does not target any particular income segment but is willing to lend as long as the customer is willing to pay. AMMB believes the balance sheet is well-positioned such that the impact of any rate increase or decrease would be largely neutral to the group.
We maintain our 'underweight' call on the sector.'' ' RHB Research Institute, Oct 25
This article appeared in The Edge Financial Daily, October 27, 2011.
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