BUSINESS

KENANGA NEUTRAL ON BANKING SECTOR

29/12/2021 12:53 PM

KUALA LUMPUR, Dec 29 -- The banking sector will benefit from greater business confidence as the country moves towards a highly vaccinated economy, which should translate to better financing health, said Kenanga Investment Bank Bhd (Kenanga).

However, the research firm believes that near-term sentiment could be hampered by medium-term competitiveness led by the injection of digital banking products.

“While we do not believe this will be a threat to the loans market, given their target on micro-loans and personalised products, the need for cheap funds (deposits) is uniform as with the conventional banks,” it said, adding that as such, it has maintained its ‘neutral’ call on the banking sector.

On banking stocks, Kenanga named RHB Bank as its top pick, since it is the only listed conventional bank vying for a digital banking license via its collaboration with Axiata Digital (Boost), which has strong odds of winning a license.

“Although the digital bank might not contribute to earnings immediately, a frontrunner exposure could yield favourably as the landscape matures,” it said.

Meanwhile, Kenanga also highlighted Alliance Bank Malaysia Bhd (ABMB) on its better return on equity (ROE) expectations.

ABMB has the highest small and medium enterprise mix among its peers at 46 per cent, compared with the average of 35 per cent, which should allow for higher growth traction in line with economic recovery.

“Management’s confidence to resume dividend payments to pre-pandemic levels translates to yields of five per cent, better than its similarly-sized peers,” it added.

“Additionally, an expected nine per cent forward ROE is parallel to larger cap competitors,” it said.

On loan growth, Kenanga projected a five per cent loans growth in 2022, noting that as of October 2021, system loans growth was reported at 3.3 per cent year-on-year, which is within the industry-wide expectations of between three per cent to four per cent for 2021.

At 11.52 am, RHB Bank’s shares were flat at RM5.34 and ABMB lost three sen to RM.2.86.  

-- BERNAMA


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