Long time never see all KLCI index all red colour.
What to buy during this crash?
Stay OVERWEIGHT, Pecking order BUYs: CIMB> PBB > RHB > AMMB > HLB > Maybank
We maintain our OVERWEIGHT stance on the Malaysian banking sector, with the sector currently trading at 1.10x 2025E PB, in line with a 10-year average multiple of 1.14x. We believe the recent share price retracement presents an opportunity to accumulate quality banks on weakness. We like CIMB (BUY; TP: RM9.30) as a liquid large-cap with a strong ASEAN footprint, PBB (BUY; TP: RM5.30) and HLB (BUY; TP: RM24.30) for their defensive nature and solid asset quality. We also have BUYs on RHB (BUY; TP: RM7.90) and Maybank (BUY; RM11.90) for their attractive dividend yields. We like AMMB (BUY; TP: RM6.30) as a preferred small-cap bank pick.
Pecking order BUYs: CIMB > PBB > RHB > AMMB > HLB > Maybank
- CIMB (CIMB MK, BUY; TP: RM9.30) is our preferred large-cap pick. CIMB's sizable ASEAN market share, compared to its domestic peers, offers ample opportunities for cross-border transactions and financing. For 2025, CIMB guided NIM to be stable with a potential 5bps compression (2024: 2.21%). While NIMs are expected to remain stable in Malaysia, potential volatility in Indonesia (-20bps to +10bps), Singapore, and Thailand operations may be a drag. The bank's higher loan growth target of 5-7% is underpinned by improving liquidity conditions and a continued focus on a deposit-led strategy. Given CIMB's robust dividend outlook, disciplined strategy to drive ROE, favorable macroeconomic conditions, and the return on foreign interests, we believe a premium valuation is justified. Our key assumptions include sustainable ROE of 11.4%, cost of equity of 9.4%, and long-term growth of 3.5%.
- Public Bank (PBK MK, BUY; TP: RM5.30). PBB is recognized as a quality name within the banking sector, consistently achieving one of the highest asset qualities. PBB has low credit costs (2024: 0bps) and a GIL ratio of 0.52%, below the industry average of 1.44%, supported by a robust LLC of 166% and robust capital position (CET1: 14.3%). For 2025, PBB targets loan growth of 5-6%, driven by a strong pipeline of approved SME loans, though mortgage growth may moderate. The recent strategic acquisition of LPI (non-rated) at an attractive 1.6x consensus 2024E P/BV is expected to enhance ROE through synergies. Additionally, PBB has increased its dividend payout ratio guidance to 60% and is targeting a 2025 ROE of 13%. Our key assumptions are a sustainable ROE of 12.7%, a cost of equity of 8.9%, and a long-term growth rate of 3.5%.
- RHB (RHBBANK MK, BUY; TP: RM7.90) offers attractive valuations with a sector-high dividend yield. RHB recently unveiled its new 3-year plan - PROGRESS27, with key targets including ROE of >12%, CIR of <1.3%. This is expected to be driven by business-as-usual (BAU) growth, focusing on middle-market SMEs, funding management, and overhead costs. We expect NIM to remain stable, supported by funding cost optimisation through liability management initiatives and higher CASA balances, particularly in sectors such as education and tourism. RHB targets a 6-7% loan growth in 2025, with a focus on key regions, including Johor, the Klang Valley, Selangor, Penang, and Sarawak. RHB is also exploring thematic opportunities in sectors such as data centres, healthcare, and manufacturing while maintaining a selective approach to residential mortgages. Our key assumptions are a sustainable ROE of 10.1%, a cost of equity of 9.9%, and a long-term growth rate of 3.5%.
- AMMB (AMM MK, BUY; TP: RM6.30) stands out as one of the most efficient small-sized banks, with a commendable CIR of 45% in 9MFY25. We anticipate FY25E core earnings growth of +14% YoY, driven by sustained NIM expansion (FY25E estimated NIM +14bps to 1.98%), bolstered by optimized funding costs due to ample liquidity in the capital market. AMMB aims to achieve a higher ROE of 11-12% by FY29, in line with its FY25-29 Winning Together strategy, which is based on a 1.1% ROA target. Despite the termination of its insurance arm sale, AMMB remains well-capitalized, with a CET1 ratio of 15.33%, including 3QFY25 unverified profits. We expect a full-year DPS of 29.5sen, representing a 50% payout ratio. Our key assumptions are a sustainable ROE of 9.7%, a cost of equity of 9.9%, and a long-term growth rate of 3.5%.
- Hong Leong Bank (HLBK MK, BUY; TP: RM24.30). HLB demonstrates qualities typical of a defensive bank akin to PBB. Despite a relatively smaller asset base (ranked 5th), HLB consistently delivers one of the highest ROE/ROA among its peers at 11.8%/1.5%, respectively, largely due to significant earnings contributions from its associate, Bank of Chengdu (BOCD). HLB is strengthening its digital capabilities, having recently introduced an AI voice bot designed to enhance operational efficiency and improve customer experience. For FY25, HLB targets loan growth of 6-7%, with continued focus on achieving double-digit growth in key segments, such as community SME banking (FY24: +13.9% YoY) and SME (FY24: +13.6% YoY), which collectively make up c.29% of the total loan book. HLB aims to maintain healthy net credit costs below 10bps. Our key assumptions are a sustainable ROE of 11.6%, a cost of equity of 10.4%, and a long-term growth rate of 3.5%.
- Maybank (MAY MK, BUY; TP: RM11.90). Maybank has made steady progress toward its M25+ ROE target of 11–12% (2024: 11.2%). Targets for 2025 include: (1) loan growth of 5- 6%, (2) cost-to-income ratio of 11.3%, and (4) net credit charge-off rate of <30bps. The loan growth target is conservative, slightly above 1x GDP, reflecting consideration of margins on new loans and the pace of deposit growth. NIM is expected to remain stable at 2.05%, supported by efforts to expand higher-yielding segments and improve the CASA ratio. Asset quality continues to strengthen, with stable trends observed across consumer and business segments. We expect this momentum to sustain into 2025, supporting its credit charge-off target of <30bps. Our target price is based on a 1.37x 2025E P/BV (near +2SD from the 10-year mean), which we believe is warranted given its improved ROE and asset quality, its position as Malaysia’s largest bank, and an appealing 2025E dividend yield of 6%.
Source: Phillip Capital Research - 2 Apr 2025
