EARNINGS VISIBILITY: HwangDBS Research says AFG is currently the cheapest Malaysian banking stock, and its scalable domestic franchise and non-interest income traction, will ensure sustainable earnings and return on equity.
KUALA LUMPUR: HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) says Alliance Financial Group (AFG) will stand out in the next round of bank consolidation, given its attractive valuation and strong earnings visibility, going forward.
In a research note on Malaysia Banks, HwangDBS Research said AFG is currently the cheapest Malaysian banking stock, and its scalable domestic franchise and non-interest income traction, would ensure sustainable earnings and return on equity.
Among large caps, HwangDBS said it still prefers Maybank over CIMB.
It said Hong Leong Bank was a defensive play, adding, as a newly merged entity, net interest margins (NIMs) should improve gradually and its presence stepped up in the auto and small and medium enterprise segments.
HwangDBS was retaining its 15 per cent loan growth target for this year, with second half growth driven by consumer and business, as well as a potential upside from capitalisation of Economic Transformation Programme projects.
It said despite better than expected non-interest income in the second quarter, it remained cautious of volatile capital markets and sustainability of investment gains.
“As such, we are retaining our 13 per cent growth target for non-interest income this year.
“However, we expect banks to continue to build traction in sustainable fee income, especially in transaction banking,” it added.
HwangDBS said net interest income would be supported by loans growth as net interest margins would continue to be under pressure. — Bernama