HONG LEONG BANK GETS 'BUY' CALL FROM MAYBANK IB, AMINVESTMENT BANK

KUALA LUMPUR, April 2 -- Maybank Investment Bank Bhd Research (Maybank IB Research) has maintained its “buy” call on Hong Leong Bank Bhd (HLBank).

However, the research house revised the target price to RM15.10 from RM17.40 set earlier, on a lower price-to-book value (PBV) of 1.1 times against 1.2 times previously.

“With its strong asset quality (gross impaired loan ratio of 0.8 per cent), liquid balance sheet (loan-to-deposit ratio of 85 per cent), strong capital position (common equity tier 1 of 14 per cent post-regulatory release), HLBank is a safe harbour in such volatile times,” it said in a note today.

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Nevertheless, Maybank IB Research said it had raised its credit cost estimates and cut the HLBank’s 18 per cent-owned associate company in China - Bank of Chengdu’s (BOC) earning growth, thus lowering HLB’s financial year-end June 30, 2020- 2022 estimates (FY20-22E) earnings by five to six per cent.

“BOC’s operations were affected by the China lockdown in January and February 2020, but operations are resuming some level of normalcy from now on,” it said.

Meanwhile, AmInvestment Bank Bhd has also maintained its “buy” call on HLBank with an unchanged fair value of RM15.90 per share.

“This is based on FY21 return on equity of 9.7 per cent leading to a P/BV of 1.1 times, and we make no changes to our estimates,” it said.

AmInvestment Bank said it understood that the 6-month moratorium would not cause the bank’s impaired loan ratio and provisions to rise, as there will be no deterioration in the staging of loans during this period. 

“In view of the moratorium that will be granted for six months from  April 1,2020 with payments resuming from Oct 1, 2020, with the group’s financial year-end in June, FY20 credit cost is likely to remain stable,” it said.

It also said the bank has minimal loans exposure to the oil and gas sector at RM580 million (0.4 per cent of total loans) and only RM217 million of loans to this segment have been identified as heavily impacted by the lower oil prices. 

“Meanwhile, the bank has no loan exposures to airlines. Its loan exposure to the more vulnerable sectors, which include tourism and hotels is RM 2.4 billion (less than two per cent of its total outstanding loans),” it said.

On tourism and hotels, the group has a loan exposure of RM396 million, it added.

At 10.50 am, HLBank’s shares fell six sen to RM13.16 from RM13.22 at Wednesday’s close, with 247,100 shares transacted.

-- BERNAMA