May 4, 2010

Banking Sector Update – Maintain Positive : MIDF

Our key banking stock picks remains CIMB (TP: RM14.50), RHB Capital (TP: RM7.10) and Public Bank (TP: RM12.80).

MARCH 2010 STATISTICS – OVERALL INDICATORS STABLE

We expect interest rates to further normalised following indications by Bank Negara of a firm recovery in economy. We look forward to the subsequent MPC meeting dates on 13th May (3rd meeting), 8th July (4th meeting), 2nd Sept (5th meeting) and 12th November  (6th meeting)  for possible announcement of  further hikes  in OPR. Additionally, by June 2010, Bank Negara is expected to announce the banks which will be awarded commercial and Islamic banking licenses following the liberalisation of the sector earlier in 2009.   


We  continue  to  expect  lower  loan  loss  provision  and  lower  credit  charge-off  of  banks’  overseas  operations leading to stronger contribution to local banking group’s earnings. Public Bank which has announced its 1Q10 results had lower  loan  loss provision and credit charge-off for  its Cambodian and Hong Kong operations while  that of  CIMB Niaga and CIMBThai  reported  stronger  results  for  the  latest quarter. We believe that banks with stronger regional focus will post higher earnings following the rebound of Asian countries’ economy.

We remain positive on banking sector. Our key banking stock picks remains CIMB (TP: RM14.50), RHB Capital (TP: RM7.10) and Public Bank (TP: RM12.80).

by Midf Research