HLBANK - Driving for Sustainable Profitability

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: TA

Price Call: SELL

Target Price: 14.10

HLBANK - Contribution from international operations stay strong

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MIDF

Price Call: BUY

Target Price: 16.50

HLBANK - 1QFY14 Up on Writebacks and Higher Associate Profit

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: TA

Price Call: SELL

Target Price: 14.40

3Q FY13 Net Profit Down 10.6% QoQ

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: TA

Price Call: SELL

Target Price: 15.50

Credit cost to edge to "normal" level in the quarters ahead

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MIDF

Price Call: HOLD

Target Price: 15.00

Improvement in operating efficiencies to be a key focus

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MIDF

Price Call: HOLD

Target Price: 15.00

Modest Growth Envisaged for FY13

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: TA

Price Call: SELL

Target Price: 13.20

A Good Start to FY13

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: TA

Price Call: SELL

Target Price: 13.80

Loan growth remained lacklustre

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MIDF

Price Call: HOLD

Target Price: 13.60

Hong Leong Bank - Extraction of merger synergies well on track BUY

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: AMMB

Price Call: BUY

Target Price: 14.10

- We maintain BUY on Hong Leong Bank Bhd (HLBB), with a fairvalue of RM14.10/share. This is based on an adjusted (for rights) ROE of 15.6%FY12F, leading to a fair P/BV of 2.3x. 

- HLBB is now targeting a high-teen growth for its SME segment,which currently makes up 15% of its total loan book. With its expanded330-branch network post merger, it remains on track to convert about 50 ofthese into new Community Business Banking Branches. 

- These are defined as branches serving SME businesses withinclose proximity to them. The identified targets are the traditionalfamily-based businesses. We believe this represents new growth area for HLBBand indicates the company's strong execution in terms of fully utilising its excessbranch capacity following the merger. 

- In terms of recent loan demand trend from itsexportsoriented customers, HLBB hinted that its business banking loan divisionhas generally seen slower demand, due largely to its business borrowersadopting a more cautious stance. However, there is also an offsetting positivefeedback from its domestic-oriented business borrowers, who are optimisticabout rollout of  domestic EconomicTransformation Programme (ETP)-related projects. HLBB is targeting an overallloans growth (excluding repayments) in the high single-digit levels. 

- HLBB alluded to gross impaired loans remaining benign sofar. Its early-alert monitoring system, which allows the bank to monitor loanrepayment and aging analysis, has not turned up any worrying trends for anyparticular segment of its loans portfolio. As for clean-up provisions, weunderstand these have already been largely provided for in 1HFY12. This wasdone through the harmonisation of collective and individual assessment policieswith EON Bank's. 

- Non-interest income is expected to normalise in the absenceof marked-to-market losses related to interest rate swaps. For its fee-basedincome, we understand that its previous two quarters' strong performance  in particular in relation to its credit cardssegment is likely to be sustainable. 

- HLBB is well on track to realise further synergies  from the merger but we believe it remainsunder-appreciated for its strong execution track record to date. We remain positiveon HLBB. Key catalysts are:- (a) a strongerthan-expected top line growth; (b)sustained asset quality, (c) seamless integration in its merger with EON Bank;(d) better-than-expected ROE of close to its internal target of 16% to 17%.

Source: AmeSecurities

Banking - OVERWEIGHT - Bright spots for Responsible Finance them

Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD

Research House: KENANGA

Price Call: BUY

Target Price: 4.30

Stock Name: BIMB
Company Name: BIMB HOLDINGS BHD

Research House: KENANGA

Price Call: BUY

Target Price: 2.90

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD

Research House: KENANGA

Price Call: BUY

Target Price: 8.50

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 10.90

Smaller banks are trading at a substantial discount to theirpeers despite their improving balance sheets. Most banks have been rerated over2009-2011 as their share prices have climbed 102% with positive consensus EPSrevisions. Nonetheless, with banks are now trading at 1.8x forward with average16.3% ROE, this makes the bigger banks seem more expensive as compared with the smaller banks, which are only pricedat 0.9x forward P/BV (a 50% discount) despite an estimated 10.3% ROE.  As such, we believe it is time to visit the smallerbanks to find the potential dark horse winners for 2012/13.

Responsible Lendingis a key theme agreed by the consensus in 2012. More responsible policyresponse will reduce systematic risks and thus should benefit banks' asset quality.As such, we reckon that the domestic banking system should continue to see the multi-yearof balance sheet enhancement.  

The banks' improvingasset quality remains as our central case. The increased trust in banks'asset quality and their continuous improvement in the same are likely to support banks' earnings growth inthe near  future  with lower  credit  cost. We  reckon  that BIMB  and AFFIN will be the keybeneficiaries for this theme. In a nutshell, we see small banks being reratedin 2012/13 as their valuation could rise closer to their bigger peers' currentvaluations and their improving asset qualities could provide the trigger forthis.  We will initiate coverage on AFFINand BIMB, driven by the following catalysts:  

-         Responsible Finance.    Bank Negara  Malaysia  (BNM) has issued a new set of guidelines toensure household debts do not pose a threat to the stability of the financialsystem.  More policy responses willreduce systematic risk and benefit bank valuation multiples. The progress ofcontinuous improving asset quality is now in motion and will be long lasting inour view, with positive consequences for banks' earnings.  

-         The two banks above should benefit from thesustainable downtrend of non-performing loans that we have witnessed thus far.Furthermore, due to the perception of weaker asset quality, the tighterregulations that BNM imposed of late i.e. 70% LTV cap for 3^rd  mortgages should in a way improve their assetquality going forward. 

-         Hence, for 2012, we are likely to see the twobanks achieving a conservative earnings growth rate of 5%-6% on the back of9%-10%  growth  in loans.  We  reckon that  our current estimates areconservative judging  from their businessvolumes, fees growth and credit qualities. As such, we believe that they arepoised for upward revisions over the next 12-24 months. We believe the twobanks would be able to achieve healthy profit growth, with provisioningcharges  continuing to drop towards andpossibly below their normalised levels.

-         Pursuant to improving asset qualities and aresultant lower credit costs, their FY12/13 Return on Equity (ROE) of 10.3%would be lower than the bigger banks' ROE rate of 13%-25% while also trading atundemanding valuations (of 0.9x P/BV) (see Figure 1).

We believe the two dark horses above share a commoncharacteristic i.e. they have decent and liquid balance sheets  (reasonable RWCR and low L/D ratio) but generallysub-par in ROAs and ROEs (in part due to their low leverage levels).  Thus far, investors have yet to be convincedby their recent management changes or new strategies, perhaps due in part totheir previously less impressive historic track records in showing improvinggrowth and profitability. In addition, they also need some critical executionrelating to regional growth and M&As may be needed and central to themrealising their full potentials. Still, our valuation model suggests that smaller banks are currently tradingwell below the overall banking stocks' price multiple ranges.  These valuations are likely to  play catch-up due to reasons mentioned above.Hence, we strongly believe that AFFIN and BIMB could be the dark horses amongthe banking stocks.

AFFIN: At just 0.7xBV, it deserves more. 

We believe AFFIN's potentially higher credit risks aresomewhat priced in by the discount in its valuation, which is already based onmore conservative earnings and credit cost assumptions. With a reasonable 9%ROE and its undemanding  valuations (FY13E:10.2x PER, 0.7x P/BV), there is room for its earnings to improve. We  are initiating  coverage  of AFFIN  with  an OUTPERFORM rating and a target price ofRM4.30.

A tough operating environment had led to previous consensusearnings and price target cuts. However, we believe its current valuation atFY13 P/BV multiple of 0.7x with an estimated ROE of 9.1% is overlypessimistic.  

BIMB: Uniquelypositioned for more growth. 

We believe BIMB's unique footprint translates into acompetitive edge  in funding as well as positioningfor growth as BIMB appears ideally positioned to capture the fastest growth in Malaysia's Islamic financingarea.  (Islamic financing has grown at aCAGR of 20% since 2005.)  It  has a  very  liquid balance  sheet  (50% L/F  ratio,  liquid assets  at  40.5% of  assets)  and the highest proportion of CASA deposits (43%) should drive faster NIMexpansion vs. other larger banks as balance sheet gearing and financings growfaster.

We are initiating coverage with an OUTPERFORM rating and aTP of RM2.90. Its unique footprint translates into a competitive edge. Itscheap funding and long term positioning for growth in Islamic areas also makeit an interesting financial stock to invest in with its current undemanding valuations.

OVERWEIGHT.    As a  result  of our  initiation  on AFFIN  and  BIMB with  an  OUTPERFORM rating for each and coupled with our recent upgrade in  CIMB rating  to  OUTPERRFORM (TP:  RM8.50), we are now raisingour sector rating to OVERWEIGHT from NEUTRAL. Following our upgrade of HLBANK(TP: RM10.90) from UNDERPERFORNM to MARKET PERFORM, we have none outstandingUNDERPERFORM call in our banking stock coverage.  

Source: Kenanga

Hong Leong Bank: Maintain Hold - Consolidating IB licences

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MAYBANK

Price Call: HOLD

Target Price: 11.60

Hold maintained. Hong Leong Bank's (HL Bank) move to sell MIMB Investment Bank (MIMB) to Hong Leong Capital (HLC) has been anticipated, while the decision to price the disposal at book value is fair, in our view. There is little impact to the group's financials - our Hold call and RM11.60 TP (P/BV of 1.7x, CY2012 ROE: 15.5%) are maintained.

Click here for full report

Source: Maybank Research - 12 April 2012

Hong Leong Bank - Branch visit confirms new SME potential for HLBB BUY

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: AMMB

Price Call: BUY

Target Price: 14.10

 - We visited Hong Leong Bank's (HLBB) new Community BusinessBanking Branch at Southgate and met with the Head of Business Banking Support,Regional Head and Branch Manager. Community Business Banking Branches arecommunity-based branches which are set up to serve the businesses within closeproximity to the branch, and are part of the planned re-investment of selectedbranches as dedicated centres to support the group's business bankingdivision.  

- The new Southgate branch forms part of the earlier  planned conversion of 48 of the mergedgroup's branches into new Community Business Banking Branch. We understand thatthat the new target is now 50, with 48 to be converted from the merged group's branches,and two new ones to be added. With the new Southgate branch, HLBB now has a totalbranch network of 330 branches, vs.329 previously. 

- Besides the Community Business Banking Branches, there arealso another 39 Business Banking Centres which serve the larger commercialloans. These larger commercial loans are considered generally to be loans inexcess of RM4mil.

- The target segment for the smaller Community BusinessBanking Branches are familybased businesses with loan amounts of less thanRM4mil. We would consider this to be a new business segment for HLBB, aspreviously the group had not emphasised the utilisation of its branch networkbefore to reach out to the businesses in the vicinity.   

- We understand the company is targeting to have at leasttwo credit officers in these Community Business Banking branches. Given thatthese are likely traditional familybased businesses, these credit officers aretrained in terms of assessment of cash flow for these businesses. 

- We understand from our visit that so far, there have beenno major strains in the company's SME portfolio, although these borrowers havebeen more vigilant in monitoring collection since the second half of last year.We understand that impaired loans trend for the SME portfolio remains benign sofar, with no major upticks seen over the past few months.  

- We believe this SME segment is a new growth potential forHLBB, which is positive. SME loans made up about 15% of total loans currently.We are also reassured by the latest impaired loans trend.  Maintain BUY with fair value ofRM14.10/share. 

Source: AmeSecurities 

HLBANK (FV12.54 - NEUTRAL) Corporate News Flash: Firms Up Sale of MIMB

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: OSK

Price Call: HOLD

Target Price: 12.54

THE BUZZ

Hong Leong Bank (HLBank) has entered into a conditional saleand purchase agreement with Hong Leong Capital Bhd (HLCB) for the proposeddisposal of its entire equity interest in MIMB Investment Bank for RM157.9m.

OUR TAKE

No surprise. The disposal of MIMB to HLCB is not surprisingas the Hong Leong Financial Group (HLFG) is not allowed to hold more than onemerchant banking licence and HLFG has always intended to maintain itsinvestment banking business under HLCB in accordance with the group'sstructure. The RM157.9m pricing was based on 1x NTA of MIMB as at 31 July 2011,which we deem fair given MIMB's unappealing ROE and the fact that the sale maynot incorporate certain elements of MIMB's treasury books.

Leveraging on MIMB'sunutilized tax losses.  We believethat the proposed rationalization of HLCB's investment banking business underMIMB, via the transfer of the entire assets and liabilities of Hong LeongInvestment Bank to MIMB, will allow HLCB to benefit from MIMB's estimatedunutilized tax losses of RM1bn. This amount can be used to offset againstfuture taxable profit on its investment banking subsidiary.

No materialimpact  on  earnings. Given MIMB's lacklustreearnings track record and franchise with an  average  annual net profit ranging from RM2.3m toRM4.7m  over the past 3 years, the saleof MIMB is a sensible move as it will allow the group to free up excessresources and focus on its core commercial banking business.

Maintain NEUTRAL.The group is poised to capitalize on  the  longer term growth opportunities  in view of its larger post-mergerorganizational footprint. However, the slowing economic environment over themedium term and HLBank's relatively conservative culture could cap any immediate-termrevenue upside synergies, which are already reflected in itslower-than-expected loans and transaction fee income growth. Therefore, we aremaintaining our NEUTRAL recommendation and FV of RM12.54 (2.0x FY12 P/BV, 15.1%ROE).

Source: OSK188

Hong Leong Bank: To sell MIMB stake to HLC

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: ECMLIBRA

Price Call: HOLD

Target Price: 11.50

Hong Leong Bank Bhd (HLB) (HLBK MK, Hold, TP: RM11.50) has entered into a sales agreement to dispose of its entire interest in MIMB Investment Bank Bhd for RM157.9m to Hong Leong Capital Bhd (HLC). In filings with Bursa Malaysia, HLB also said HLC had proposed to acquire its entire interest in Hong Leong Investment Bank Bhd (HLIB) for a sum equal to the net tangible asset of HLIB as at the date of completion of the sales agreement. Upon completion of the exercises, MIMB will cease to be a subsidiary of HLB and HLIB will become a wholly-owned subsidiary of HLB. The exercises are part of the plans to rationalise the investment banking businesses involving MIMB and HLIB. (StarBiz)

Comment: The sale consideration for MIMB of RM158m is insignificant relative to Hong Leong Bank's market cap of RM23bn. (Hon Sze)

Source: ECM Newz Bits12 April 2012

RHB Research - Banking Sector Update

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD

Research House: RHB

Price Call: BUY

Target Price: 16.07

Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD

Research House: RHB

Price Call: BUY

Target Price: 10.11

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD

Research House: RHB

Price Call: HOLD

Target Price: 8.05

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 6.75

Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 3.33

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: RHB

Price Call: SELL

Target Price: 12.11

Stock Name: AFG
Company Name: ALLIANCE FINANCIAL GROUP BHD

Research House: RHB

Price Call: SELL

Target Price: 3.85

Sector Update

Banks ' Feb '12 system data ' Leading indicators for households improved mom                    Neutral

Sector Update

Public Bank ' Fair value at RM16.07 (from RM15.00)                                                     Outperform

Maybank ' Fair value at RM10.11 (from RM9.44)                                                           Outperform

CIMB ' Fair value at RM8.05 (from RM7.47)                                                            Market Perform

AMMB ' Fair value at RM6.75 (from RM6.23)                                                           Market Perform

Affin ' Fair value at RM3.33 (from RM3.16)                                           Market Perform (Upgraded)

HL Bank ' Fair value at RM12.11 (from RM11.18)                                                      Underperform

AFG ' Fair value at RM3.85 (from RM3.69)                                                                Underperform

MBSB ' Fair value at RM2.46 (from RM2.34)                                                           Market Perform

RCE ' Fair value at RM0.57                                                                                    Market Perform

-          Feb '12 system loan growth moderated further to +11.9% yoy but was up 0.4% mom, as compared to Jan '12 loan growth of +12.1% yoy/-0.2% mom. Loan growth for both businesses and households moderated further to 11.7% yoy and 12.1% yoy, from 11.8% yoy and 12.3% yoy respectively in Jan '12.

-          We raised our benchmark PER to 15x from 14x, which broadly lifts our fair value estimates for our coverage by 4-10%. However, our Neutral stance is unchanged with Maybank and Public Bank as our top picks for the sector.

 

Source: RHB Research - 2 April 2012

Banking - NEUTRAL - 28 March 2012

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD

Research House: KENANGA

Price Call: BUY

Target Price: 9.60

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD

Research House: KENANGA

Price Call: HOLD

Target Price: 7.90

Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD

Research House: KENANGA

Price Call: BUY

Target Price: 10.40

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD

Research House: KENANGA

Price Call: BUY

Target Price: 15.50

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 6.70

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 10.90

Stock Name: AFG
Company Name: ALLIANCE FINANCIAL GROUP BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 3.70

The banking sector has moved back towards its fair valueover last three months and in our view, can no longer simply be argued as'being cheap'. Following the recent reporting season, our picks for the sectorhave changed for 2Q2012. We continue to like banks with M&As newsflows aswell as those supported by reasonable valuations. Under this strategy, we likeRHBCAP (OP, TP: RM9.60) and CIMB (MP, TP: RM7.90). MAYBANK (OP, TP: RM10.40)and PBBANK (OP, TP: RM15.50) also remain on our OUTPERFORM ratings as the twooffer reasonable dividend yields. We have however lowered our rating for AMMB(MP, TP: RM6.70) to a Market Perform from an Outperform due to its limitedupside from its current share price. Meanwhile, we are maintaining our MARKETPERFORM ratings on HLBBANK (MP, TP:RM10.90) and AFG (MP, TP:RM3.70) onvaluations ground.

The 4Q11 result trend and outlook saw the banking sectorposting a flat QoQ earnings (1.0%) with underlying profit growth momentumclearly having stalled. Going forward, there are limited opportunities to drivethe sector earnings growth materially beyond our current expectation of a high singledigit growth, given the on-going margin headwind and limited credit chargedsurprise.  The 4Q11 reporting period wasalso somewhat uninspiring for the market. Apart from the decline in capitalmarket revenues, in our view, the flat quarterly profit growth through 2011 wasactually due to the lack of policy rate rises. Non-interest incomes continue toexperienced a material decline (-7.3% YoY). We also expect softer tradingcondition to persist in the short term due to the ongoing global economicuncertainties. 

Margins emerging signs of softness without any furtherinterest rate hike (-11bps YoY, on average). We believe the margins willcontinue to face a modest headwind in 2012. Credit demand was strong however (11-15% on average vis-''-vis nominalGDP growth of 5.0%) despite the weak external outlook. Going forward, we areforecasting just a low teens credit growth to be driven by the start of theETPrelated projects.  Provisioning on newimpaired assets has been reduced but the credit charge is already low. Capitalin the sector remains strong (Industry T-1 Cap Ratio of 12.0% and RWCR of15.9%) ' which is well positioned for Basel 3. This include PBBANK (CCR: 10.7%RWCR: 15.9%) that was previously deemed as being under-capitalised.  Going forward, the capital ratio is expectedto remain healthy in supporting lending growth.

Earnings growth islimited.  Given our view thatresponsible finance will promote a healthy household lending growth, momentumof the loan growth will hence be lower for a period. As such, our base case forthe system loan growth is broadly in the low teens only.  Together with theon-going margin headwinds and limited provisioning surprise, there are limitedopportunities to drive the sector's earnings growth materially beyond ourcurrent expectations of high single digit.  

Current valuations.  Current valuations of the sector have gone upand the upside from here seems tight after rising 18% as measured by the KLFinancial Index from the October 2011's low. With earnings growth in the rangeof high single-digit to low teens, together with the already tight valuation,we

believe valuation multiple expansions are thus unlikely.Hence, we are increasingly looking to other factors to drive our rating recommendationssuch as M&As opportunities instead of organic growth.

The major bank valuations are 'at the middle of the ranger'of their historical mean valuations, which has typically represented their'fair values' and this will also somewhat cap their absolute performance apart fromthe current uncertain external economic outlook.  

To ride on 2Q2012news flows. For stocks, although our Target Price for RHBCAP has beenreduced (due to relative weak earnings), its discount valuation remainssupported by better growth prospects for the year ahead from its potentialmerger with OSK. Following the reporting season and the strong rebound of a fewanchor banks from their October 2011's low i.e. MAYBANK (+5%), PBBANK (+8%), AMMB(+2%), our pecking order has now changed to 1) RHBCAP and 2) CIMB withpotential M&A news flows to rerate these stocks' valuations. Meanwhile,thus far, the foreign shareholding of CIMB is still at its 18-month low despitethe increasing foreign net buying on Bursa Malaysia.

Source: Kenanga 

Hong Leong Bank - Undetected super strong core net earnings trend BUY

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: AMMB

Price Call: BUY

Target Price: 14.00

- We maintain BUY on Hong Leong Bank Bhd (HLBB), with ahigher fair value of RM14.10/share (from RM13.00 previously). This is based onan adjusted (for rights) ROE of 15.6% (from 14.7%) FY12F, leading to a fairP/BV of 2.3x (from 2.1x previously). 

- We believe HLBB's is underappreciated for its strong corenet earnings trend, which had remained undetected based on its latest reportedresults. To recap, HLBB reported a net earnings of only RM381mil  or a 6% decline on QoQ basis. 

- However, net earnings was affected by a few one-off items.First, non-interest income was still affected by RM32mil loss on its hedgecontracts. More importantly, this disguised the strong trajectory in allportions of its sustainable fee income, in particular its credit card fees. Creditcard related fees is estimated to have easily doubled from HLBB's pre-mergerlevels, and this is largely due to effective harvesting of HLBB's new numbertwo (from number 3 previously) ranking in terms of credit card positioning. Wehave upgraded our noninterest income substantially by 28% FY12F, and 20% respectivelyfor FY13F and FY14F.   

- Secondly, asset quality has turned out to be much better thanexpected. We understand that that there had been no worrying signs in terms ofthe merged entity's impaired loans level. We are also reassured there is closemonitoring of aging of loans going by days as part of its pre-emptivemonitoring process. Thus, we are now lowering our assumption for credit costsfor HLBB,  to 39bps (from 70bpspreviously) for FY12F, and 41bps (from 70bps previously) FY13F. The company'scredit costs guidance is 30bps to 60bps FY12F.  

- Third, overhead expenses was overstated by a significant38% in 2QFY12, based on the reported results which included one-off items such asthe VSS costs. But more importantly, even if we are to strip off the one-off items,we estimate normalised merged group's opex to be easily 4% lower than HLBB-EONBank's standalone basis and 5% below our estimates. We are thus reducing overalloverhead expense by 5% FY12F, 12% FY13F and14% FY14F.

- HLBB is well track to realise further synergies from this mergerbut we believe it remains underappreciated for its strong execution trackrecord to date. We remain positive on HLBB. Key catalysts for HLBB are:- (a) stronger-than-expectedtop line growth; (b) sustained asset quality, (c) seamless integration in itsmerger with EON Bank; (d) better-than-expected ROE of close to its internaltarget of 16% to 17%.

Source: AmeSecurities

Hong Leong Bank - Parting with MIMB

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: CIMB

Price Call: SELL

Target Price: 11.00

Target RM11.00

Hong Leong Bank's proposed sale of MIMB Investment Bank is not a surprise given the bank's wish to focus purely on commercial and Islamic banking. As MIMB is expected to be sold at its book value, the deal will be neutral for the group.

Source: CIMB Day Break 13 March 2012, Full PDF Report

Hong Leong Bank: Maintain Hold - Merger benefits filtering through

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: MAYBANK

Price Call: HOLD

Target Price: 11.60

Results above forecasts. HL Bank's 2QFY12 net profit of RM788m (+44% YoY) was above our and consensus expectations, largely on account of lower-than-expected provisions. While we are positive on merger benefits filtering through, valuations are fair at this stage, in our view. Our forecasts are revised up by about 10% for FY12 and FY13 respectively, and our TP is raised to RM11.60 (P/BV of 1.7x, CY2012 ROE: 15.5%). Hold maintained.

Maybank Research 28 Feb 2012

Click here for full report