Banking stocks continue rally
Investors buy their shares on expectations of better earnings this year
PETALING JAYA: A handful of banking stocks continued their winning streak from the week before as investors bought on expectations that banks will see better earnings this year.
Among the banking stocks that rose yesterday were Allianz Malaysia Bhd (14 sen to RM11.50, Hong Leong Bank Bhd (14 sen to RM13.58), AMMB Holdings Bhd (9 sen to RM4.99), RHB Bank Bhd (8 sen to RM5.20) and Affin Holdings Bhd (3 sen to RM2.87).
However, Malayan Banking Bhd and CIMB Group Holdings Bhd which enjoyed a spectacular run in the past one week saw some mild profit-taking which was to be expected.
Notably, both stocks continue to trade at multi-month highs.
It is to be noted however, that banks which have seen weak earnings in the past couple of years, are generally still conservative and have on the whole guided for a mid to upper single digit loan growth target for 2017.
In their report yesterday, both Maybank Research and AMInvestment Bank (AB) Research maintained their “neutral” views on the industry.
AB Research said in its report that with the exception of Alliance Financial Group Bhd, loans growth of all other banks: Maybank , CIMB, Public Bank Bhd, RHB Bank, Hong Leong Bank and AMMB accelerated in the fourth quarter of 2016.
“Aggregate sector’s gross loan growth improved 3.9% quarter-on-quarter (q-o-q), compared with +1.7% q-o-q in the third quarter of 2016.
“For the larger capitalised banks, Maybank and CIMB, corporate loans picked up pace in the fourth quarter of 2016.
“Maybank registered a stronger corporate loan growth in all of its home markets (Malaysia, Indonesia, Thailand),” AB research said.
“Meanwhile, CIMB’s stronger corporate loan momentum in Malaysia and Indonesia, contributed to an improved loan growth in the fourth quarter of 2016,” it added.
AB Resarch said that on a yearon-year (y-o-y) basis, aggregate sector’s loan slowed down to 6% yoy in the fourth quarter of 2016 compared to 10.3% y-o-y in the corresponding period the previous financial year.
AB Research said that there has generally been a slowdown in domestic retail loans, contributed by softer mortgage loans and hire purchase financing.
“This has been evidenced in the slower retail loans momentum for Public Bank and Hong Leong Bank. Meanwhile, corporate loans have been slow with only a pick-up seen in the fourth quarter as in the case of Maybank and CIMB,” it said.
“In a contrasting trend, AMMB and RHB Bank’s corporate loans contracted due to repayments.
“The expansion in AMMB’s loans was driven by mortgage loans, better utilisation of trade and SME loans,” it added.
Meanwhile, Maybank Research in its report said cumulative gross loan growth for the seven banks picked up momentum in the fourth quarter of 2016 and ended the year up 6% y-o-y versus growth of just 2.3% y-o-y in the third quarter of 2016.
“Excluding forex, CIMB’s loan growth was a slower 6.4%.
“The loans pick-up in the fourth quarter of +3.9% q-o-q was particularly evident for the banks with larger corporate businesses such as Maybank, CIMB and AMMB, for this is where the growth had emanated from, amid still subdued retail loan demand,” Maybank Research said.
“Essentially the pick-up in the fourth quarter was driven by stronger domestic loan growth, rather than overseas loan growth. Maybank’s domestic loan growth was 6.3% y-o-y, while Singapore and Indonesia reported normalised (ex-forex) loan growth of 4.5% and 8.7% respectively,” it added.
Maybank Research noted that CIMB saw healthy domestic loan growth of 10.5% y-o-y, but this was mitigated by subdued growth in Indonesia, Thailand and Singapore of 1.6%, 2.1% and 4.9% (ex-forex) respectively.