Banking Sector Update : 2QCY10 Report Card – Lower Impairment Allowances For Loans Help Beat...

8/8/2019 Banking Sector Update : 2QCY10 Report Card Lower Impairment Allowances For Loans Help Beat Forecasts - 02/0

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Table 1: Sector ValuationsPER (x) EPS gwth (%) P/ BV (x) ROE (% ) Net Div Yld (%)

Price FV Rec FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY 11

Maybank 8.49 9.86 OP 15.7 13.7 42.6 14.7 2.2 2.0 14.5 15.0 4.9 3.1CIMB 7.90 8.40 OP 16.5 14.0 20.8 17.2 2.2 2.0 15.2 15.1 1.2 1.2Public Bank - L 12.14 13.75 OP 14.8 13.2 11.8 11.8 3.4 3.0 24.2 23.8 3.7 4.0AMMB^ 5.80 6.95 OP 13.8 12.1 20.8 14.1 1.6 1.5 12.5 13.0 2.5 2.9HLB 8.84 10.70 OP 13.0 12.5 9.1 3.9 2.2 1.9 16.3 15.1 2.0 2.0Affin 3.08 4.10 OP 9.5 8.9 30.1 6.4 0.9 0.8 9.8 9.6 2.1 2.1AFG^ 3.10 3.50 OP 12.4 11.3 28.9 9.0 1.5 1.3 12.5 12.3 2.1 2.1EON Cap 6.98 8.33 MP 11.5 10.1 23.5 14.3 1.2 1.1 11.3 11.6 1.4 1.4RHB Cap 6.84 NR NR 10.7 9.8 14.3 9.4 1.5 1.4 14.8 14.9 2.5 2.7

Sector Wt. Avg 14.8 13.0 24.2 13.4 2.3 2.1 16.3 16.3 3.0 2.6

*Not under coverage. Forecasts based on IBES estimates ^FY10-11 valuations refer to those of FY11-12

Earnings momentum gathered steam 2QCY10 earnings gatheredfurther momentum, with five of the eight banking stocks that we coverreporting quarterly numbers that beat our as well as consensus

expectations. The most common variance was due to lower-than-

expected impairment allowances for loans (Affin, AFG, AMMB and HL

Bank). Other causes for the stronger-than-expected results were: 1)

strong non-interest income contribution (AMMB); 2) overheads that were

well controlled (EON Cap); and 3) lower-than-expected effective tax rate

(HL Bank).

bringing 2Q net profit to another high. Following from the above,2QCY10 reporting season resulted in another quarter of record aggregate

profit (+5.3% qoq; +33.5% yoy) being reported for the domestic banking

system. Not surprisingly, the bulk of the trends noted during the quarter

were, thus, positive, i.e.: 1) loan growth gathered further momentum; 2)

NIM expansion (+6bps qoq; +9bps yoy); 3) absolute overhead level wasbroadly stable qoq. Consequently, CIR fell to 47.2% from 48.4% in

1QCY10 on an enlarged income base; and 4) lower loan loss provisions (-

0.9% qoq; -51.1% yoy).

Asset quality. Absolute gross NPLs/impaired loans as at end-Jun 10rose 1.6% as compared to end-Mar 10, largely due to the adoption of

FRS139 by AMMB while Public Bank adopted more stringent criteria for

the classification of impaired loans. Aggregate gross and net

NPLs/impaired loans ratio stood at 3.86% (end-Mar 10: 3.94%) and

2.38% (end-Mar 10: 2.31%) respectively.

Risks. The risks include: 1) slower-than-expected loan growth; 2)deterioration in asset quality; and 3) changes in market conditions that

adversely affect investments portfolio.

Forecasts. Except for Public Bank, Maybank and CIMB, our earningsforecasts for the other banks were revised upwards to take into account

the stronger-than-expected set of results.

Investment case. We are maintaining our Overweight rating on thesector. We like Maybank, CIMB, AMMB and Public Bank for an

exposure to large cap banking stocks. HL Bank, Affin and AFG are also

rated as Outperform while EON Cap is rated Market Perform.

Corporate High l ig hts

Sec to r Upda te

Banking2QCY10 Report Card Lower Impairment Allowances

For Loans Help Beat Forecasts

Malasia

2 September 2010

Recom : Overweight(Maintained)

Please read important disclosures at the end of this report.

M

ARKET

DATELINE

PP7767/09/2010(025354)

RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

Chart 1. Industry NPL

1

3

5

7

9

1

1

1

1

24,000

29,000

34,000

39,000

44,000

49,000

54,000

59,000

64,000

69,000

Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

(%)(RMm) Gross NPL (LHS) Gross NPL ratio (RHS) Net NPL ratio (RHS)

Chart 2. Industry LLC

35

40

45

50

55

60

65

70

75

80

85

90

95

100

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

(%)

David Chong, CFA(603) 9280 2186

[email protected]


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as aggregate loan growth still healthy ... As mentioned above, aggregate loan base rose from RM756.5bnto reach RM786bn. Among the segments that grew faster than industry include purchase of non-residential

property (+5.8% qoq), personal use and credit cards (+4.7% and +4.3% qoq respectively, but from a lower

base) as well as loans for working capital (+4.4% qoq). Banks that reported below industry growth (qoq) were

HL Bank (+3.2% qoq, mainly driven by working capital loans), AMMB (+1.7% qoq, reflecting managements

focus in growing profitable assets and corporate segment) and Alliance (+0.7% qoq, as focus shifted away from

personal loans).

For banks at the other end of the spectrum, Affins loan growth was driven by loans for HP (+6.5% qoq;

+20.1% yoy) and purchase of non-residential properties (+17.4% qoq; +55.1% yoy) while RHBs key growth

drivers were purchase of securities (+22% qoq; +56.5% yoy), residential properties (+4.2% qoq; +15.6% yoy)

and others (+10.3% qoq; >100% yoy). As for EON, its consumer loan book continued to grow strongly.

Looking ahead, Juls banking system loan growth remained at a healthy +11.9% yoy while loan applications

reached a new high for the banking system. All these were achieved notwithstanding the three OPR hikes that

had taken place thus far, which suggests that demand for loans have not been dampened. In terms of

applications by purpose, the growth was underpinned by applications for the purchase of residential and non-

residential properties, construction and working capital purposes. We think the strong loan application pipeline

should be supportinve of loan growth ahead. For the banking system, we project 2010 loan growth of between

10% and 11%.

Chart 7 : Aggregate Loan Growth : +3.9% QoQ Chart 8 : QoQ Loan Growth Most Banks Above Industry

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

0

100

200

300

400

500

600

700

800

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)(RMbn)

(CY)

Gross loan (RMbn - LHS) qoq (% - RHS)

0%

1%

2%

3%

4%

5%

6%

Alliance

AMMB

HLBan

k

In

dustry

Pu

blic

Ban

k

CIMB

May

ban

k

EON

RHB

Affin

Source: Companies * For banks with foreign operations, loan growth refers toMalaysia operations only.Source: BNM, Companies

Chart 9 : Loans : Purchase Of Residential Properties Chart 10 : Strong QoQ Loan Growth Performers ForResidential Properties

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

50,000

100,000

150,000

200,000

250,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

RMm

(CY)

Purchase of residential properties (LHS)

QoQ chg (RHS)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

QoQ chg CIMB EON Public Bank RHB

Source: BNM Source: Companies


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Chart 11 : Loans : Purchase Of Non-Residential Properties Chart 12 : Strong QoQ Loan Growth Performers For Non-Residential Properties

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0

10,000

20,000

30,00040,000

50,000

60,000

70,000

80,000

90,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

RMm

(CY)

Purchase of non-residential properties (LHS)

QoQ chg (RHS)

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

QoQ chgEON AMMB CIMB Affin Public Bank


Chart 13 : Loans : Purchase Of Transport Vehicles Chart 14 : Strong QoQ Loan Growth Performers ForTransport Vehicles

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

100

20,100

40,100

60,100

80,100

100,100

120,100

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

RMm

(CY)

Purchase of transport vehicles (LHS)

QoQ chg (RHS)

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

QoQ chg Affin CIMB Public Bank RHB


Chart 15 : Loans : Working Capital Chart 16 : Strong QoQ Loan Growth Performers ForWorking Capital

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

175,000

180,000

185,000

190,000

195,000

200,000

205,000

210,000

215,000

220,000

225,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

RMm

(CY)

Working capital (LHS) QoQ chg (RHS)

-15%

-10%

-5%

0%

5%

10%

15%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

QoQ chg HL Bank AMMB Maybank Public Bank


while NIM expanded on OPR hikes. Except for RHB Cap, most of the other banks appear to have benefitedfrom the two OPR hikes that took place in 1H2010 given that assets tend to be repriced faster than liabilities.

The extent, however, varied with NIM (excluding Islamic income) expanding between +1bp qoq (Alliance and

CIMB) and +15bps qoq (Maybank). AMMB, which has the highest proportion of fixed rate loans among the banks

at 57.6%, also saw NIM expand by 2bps qoq. Nevertheless, management believes NIM has likely peaked for the

group. Overall, aggregate NIM expanded by 6bps qoq (+9bps yoy) with average yields on assets rising 14bps

qoq (-9bps yoy) while average funding cost rose by 9bps qoq (-17bps yoy).

Having raised the OPR to 2.75% from 2% at the start of the year, we think BNM could be done with its interest

rate hike for this year. That said, we would not discount altogether the possibility of another 25bps increase in

todays meeting in a move to normalise monetary conditions, but this will likely be data dependent, in our view.


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Further out, we believe BNM would likely continue with its policy normalisation. This could see the OPR raised by

another 50-75bps in early 2011, bringing the rate to a more normal level of 3.25-3.5% by mid-2011.

Chart 17 : NIM Up QoQ And YoY On OPR Hikes Chart 18 : NIM Most Banks Higher QoQ

2.20

2.30

2.40

2.50

2.60

2.70

2.80

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)

1.50

1.70

1.90

2.10

2.30

2.502.70

2.90

3.10

3.30

3.50

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBan

k

May

ban

k

Pu

blic

RHB

Cap

(%)2Q09 3Q09 4Q09 1Q10 2Q10

Source: Companies Source: Companies

Chart 19 : Asset Yields Improved On Quicker Repricing ... Chart 20 : Largely Across The Board

3.50

4.00

4.50

5.00

5.50

6.00

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)

(CY)

3.2

3.7

4.2

4.7

5.2

5.7

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBank

Maybank

Public

RHB

Cap

(%)2Q09 3Q09 4Q09 1Q10 2Q10


Chart 21 : Cost Of Funds Trended Up Slightly Chart 22 : Maybank And HL Bank Registered Lower QoQ

Cost Of Funds

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90

3.10

3.30

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)

(CY)

1.4

1.6

1.8

2.0

2.2

2.4

2.6

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBank

Maybank

Public

RHB

Cap

(%)2Q09 3Q09 4Q09 1Q10 2Q10


Non-interest income down marginally. Aggregate non-interest income came in at RM3.42bn (-1.8% qoq; -1.2% yoy). Although AMMB 1QFY11 non-interest income surprised on the upside, nevertheless, this was not

sufficient to offset the drop in Maybanks non-interest income. The decline in Maybanks non-interest income was

not too surprising given that the previous quarter received a boost from lumpy items such as unrealised gains

from the revaluation of derivatives.


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Chart 21 : CIR Fell Further To 47.2% From 48.4% Chart 22 : Except For Maybank And Affin, CIR For OtherBanks Trended Down QoQ

-10

-5

0

5

10

15

20

25

40

42

44

46

48

50

52

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)(%)

(CY)

Cost/income ratio (% - LHS) qoq (% - RHS)

28

38

48

58

68

78

88

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBan

k

May

ban

k

Pu

blic

RHB

Cap

(%)2Q09 3Q09 4Q09 1Q10 2Q10


Chart 23 : Pre-Provision Profit Touches New High ... Chart 24 : Helped By CIMB, AMMB and Public Bank

-40

-30

-20

-10

0

10

20

30

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)(RMbn)

(CY)

Pre-provision profit (RMbn - LHS)

qoq (% - RHS)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBan

k

May

ban

k

Pu

blic

RHB

Cap

(RMm)2Q09 3Q09 4Q09 1Q10 2Q10


Impairment allowance on loans down marginally. As mentioned above, this line item was the main sourceof earnings surprise for majority of the banks that reported results that exceeded expectations. Aggregate loan

loss provision (LLP) or allowance for impairment of loans was down 0.9% qoq (-51.1% yoy). Notable qoq

improvements were reported by AMMB, Alliance and HL Bank while Affin would have reported a net writeback of

allowance if not for the RM30m provision for a legal suit. These positives were offset by higher LLP for Maybank

(partly due to preemptive provisioning) and Public Bank (absence of one-off recovery in 1QCY10). Generally, the

banks appeared optimistic that LLP would continue to remain low ahead.

Chart 25 : LLP Broadly Stable QoQ Chart 26 : LLP of AMMB, Alliance and HL Bank DisplayedSignificant Improvement QoQ

-60

-40

-20

0

20

40

60

80

100

120

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%)(RMbn)

(CY)

Loan loss provision (RMbn - LHS) qoq (% - RHS)

-200

-100

0

100

200

300

400

500

600

700

800

900

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBank

Maybank

Public

RHB

Cap

(RMm) 2Q09 3Q09 4Q09 1Q10 2Q10



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NPLs rise due to FRS139. Absolute gross NPLs/impaired loans as at end-Jun 10 rose 1.6% as compared toend-Mar 10, largely due to the adoption of FRS139 by AMMB while Public Bank adopted more stringent criteria

for the classification of impaired loans. However, aggregate gross and net NPLs/impaired loans ratio stood at

3.86% (end-Mar 10: 3.94%) and 2.38% (end-Mar 10: 2.31%) respectively.

Only HL Bank and Maybank have yet to adopt FRS139, although they would do so in the next quarterly results.

Maybanks management had guided for higher impaired loans once FRS139 is adopted (in line with the

experience by the other banks) but believes that any further provisioning required under the new standard was

unlikely to be significant. As for HL Bank, management estimates the gross impaired loan ratio could rise to2.4% from 1.9% currently, but did not provide guidance on provisioning. While all banks would have adopted

FRS139 for the period ended 30 Sep, we do highlight that comparison among banks in terms of impaired loans

ratios may still be hampered by factors such as: 1) differences in trigger events adopted by different banks used

in determining whether a loan is impaired; and 2) threshold level, which varies from bank to bank, for the

determination of whether a loan is significant or not.

Chart 27 : Aggregate Net NPL U p With AMMB And AllianceAdopting FRS139

Chart 28 : Leading To Deterioration In Ratios For TheseBanks

-1.2

-1.0

-0.8

-0.6

-0.4-0.2

0.0

0.2

0.4

0.6

0.8

1

2

3

4

5

6

7

8

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

(%-Point)(%)

(CY)

Net NPL (% - LHS) %-Point change (RHS)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBan

k

May

ban

k

Pu

blic

RHB

Cap

(%)2Q09 3Q09 4Q09 1Q10 2Q10


Chart 31 : Annualised Net NPL Formation Higher QoQ ... Chart 32 : Except For Alliance, EON, HL Bank And RHB

(150)

(100)

(50)

0

50

100

150

0

50

100

150

200

250

300

1Q06 1Q07 1Q08 1Q09 1Q10

(bps)(bps) Annualised net NPL formation (bps)

Qoq bps change (RHS)

0

50

100

150

200

250

300

Affin

Alliance

AMMB

CIMB

Grp

EON

Cap

HLBank

Maybank

Public

RHB

Cap

(bps)2Q09 3Q09 4Q09 1Q10 2Q10



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Chart 33 : PBT Improved QoQ ... Chart 34 : Except For Affin, Maybank and RHB

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10(CY)

RMbn

-60

-40

-20

0

20

40

60

80

100

120

(%)PBT (RMbn - LHS)

qoq (%) (RHS)

-100

100

300

500

700

900

1100

1300

1500

1700

Affin

Alliance

AMMB

CIMBG

rp

EON

Cap

HLBank

Maybank

Public

RHB

Cap

(RMm)

2Q09 3Q09 4Q09 1Q10 2Q10


RISKS

The risks include: 1) slower-than-expected loan growth; 2) deterioration in asset quality; and 3) changes inmarket conditions that adversely affect investments portfolio.

VALUATIONS AND RECOMMENDATION

Banking sector the best proxy to the economic recovery. We continue to hold the view that the bankingsector represents the best proxy to the economic recovery and believe that the sector will help take the lead in

lifting the market to higher grounds. We expect this to be underpinned by factors such as: 1) earnings growth

gaining momentum; 2) valuations remain decent relative to the market and historical levels; and 3) relatively

low foreign shareholding levels. YTD, except for EON Cap and HL Bank, the other banks have performed at least

in line or better than the FBM KLCI.

Chart 35 : Total Returns For Aug: KLCI vs. Banks Chart 36 : Total Returns YTD: KLCI vs. Banks

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

FBM

KLCI

Affin

AFG

AMMB

CIMB

EON

Cap

HLBan

k

May

ban

k

Pu

blic

Ban

k

RHB

Cap

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

FBMK

LCI

Affin

AFG

AMMB

CIMB

EON

Cap

HLBank

Maybank

Public

Bank

RHB

Cap

Source: Bloomberg Source: Bloomberg


10/14

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Chart 37 : Total Returns For Aug: KLFin vs. Banks Chart 38 : Total Returns YTD: KLFin vs. Banks

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

FBM

Finance

Affin

AFG

AMMB

CIMB

EON

Cap

HLBank

Maybank

Public

Bank

RHB

Cap

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

FBM

Finance

Affin

AFG

AMMB

CIMB

EON

Cap

HLBank

Maybank

Public

Bank

RHB

Cap

Source: Bloomberg Source: Bloomberg

BNMs recent banking statistics help reinforce positive stance. Apart from the strong set of recentquarterly numbers, our positive stance on the banking sector is further reinforced by Juls banking statistics,

which we highlighted above. In our view, the enlarged loan base from the growth thus far should be felt in

2H2010 while the strong loan application pipeline would be supportive of loan growth ahead. This would be

further aided by the three OPR hikes that have taken place thus far.

Maintain Overweight on the sector. Thus, we maintain our Overweight stance on the sector. For anexposure to the big cap banking stocks, we like Maybank, CIMB Group, Public Bank and AMMB while HL Bank,

AFG and Affin are our picks within the mid-smaller market capitalisation segment.

Table 2 : Valuation Bases

Company

Fair Value

(RM/ share) Valuation Methodology

Affin 4.10 12x CY11 EPS, 3x discount to reflect its smaller market capitalisation

AFG 3.50 13x CY11 EPS, 2x discount to reflect its smaller market capitalisation

AMMB 6.95 Benchmark 15x CY11 EPS

CIMB Group 8.40 Benchmark 15x CY11 EPS

EON Cap 8.33 13x CY11 EPS, 2x discount to reflect its smaller market capitalisationHL Bank 10.70 Benchmark 15x CY11 EPS

Maybank 9.86 Benchmark 15x CY11 EPS

Public 13.75 Benchmark 15x CY11 EPS

Source: RHBRI


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Table 3 : Key Earnings Data

Maybank CIMB Grp PBB - L AMMB HLB EONC Affin AFG

Pre-provision Profit (RMm)

FY09a 6,437 4,875 4,000 1,986 1,147 585 670 377

FY10F 7,039 5,521 4,465 2,187 1,222 736 730 610

FY11F 7,632 6,241 4,871 2,375 1,269 799 794 664

Net Profit (RMm)

FY09a 3,818 2,807 2,517 1,009 988 341 372 301

FY10F 4,381 3,520 2,872 1,264 1,027 421 484 389

FY11F 4,925 4,124 3,212 1,442 1,051 481 514 423

Net Profit Growth (% )

FY09a 75.1 43.8 (2.5) 17.2 9.1 155.0 27.0 31.6

FY10F 14.7 25.4 14.1 25.3 3.9 23.5 30.1 28.9

FY11F 12.4 17.2 11.8 14.1 2.3 14.3 6.4 9.0

Adjusted Net I nterest Margins (% )

FY09a 2.87 3.43 2.38 3.11 2.00 2.65 2.72 2.82

FY10F 2.86 3.41 2.36 2.98 1.98 2.67 2.64 2.94

FY11F 2.86 3.38 2.35 2.99 1.94 2.59 2.60 2.96

Non-Interest Income As % of Total Income

FY09a 36.1 35.1 22.6 31.3 24.1 19.9 23.9 7.4

FY10F 35.4 33.8 22.1 34.3 24.3 20.1 23.4 19.6

FY11F 34.7 33.5 21.7 34.4 24.4 20.4 23.0 19.8

Cost-to-Income Ratio (%)

FY09a 49.9 54.0 34.5 49.0 44.4 58.9 47.4 59.5

FY10F 49.1 53.3 33.4 47.6 44.1 53.5 46.5 47.1

FY11F 48.6 51.4 32.8 47.0 44.3 52.7 45.6 46.2

Loan-to-Deposit Ratio (%)

FY09a 86.8 79.5 79.2 94.0 54.1 92.9 78.7 87.4

FY10F 86.9 75.3 82.1 92.5 54.2 92.0 82.7 87.8

FY11F 87.9 75.0 83.6 91.7 54.2 92.1 82.8 87.1

Loan Growth (% )

FY09a 10.2 20.9 18.8 12.0 8.5 8.3 12.9 10.0

FY10F 10.0 10.3 14.0 7.6 7.1 14.8 16.0 8.5

FY11F 8.0 9.4 10.0 7.0 7.0 9.1 10.1 7.2

Gross NPL Ratio (%)

FY09a 2.9 5.0 1.0 2.8 1.9 3.8 3.7 3.8

FY10F 2.9 7.0 0.9 3.5 1.8 3.8 3.5 3.5

FY11F 2.7 6.5 0.9 3.3 1.7 3.3 3.3 3.3

Net NPL Ratio (%)

FY09a 1.1 1.8 0.8 1.5 1.2 2.3 2.2 1.8

FY10F 1.3 4.1 0.8 2.8 1.2 2.9 3.0 2.0

FY11F 1.2 4.0 0.7 2.7 1.1 2.5 2.9 1.9

Loan Loss Cover (%)

FY09a 124.5 90.8 172.4 99.5 117.4 78.5 81.5 94.4

FY10F 118.9 78.2 181.0 96.6 119.0 81.3 66.4 87.9

FY11F 122.5 76.2 191.6 98.3 125.0 89.9 65.5 90.2

RWCAR (%)

FY09a 14.7 14.4 14.2 15.8 15.5 14.4 13.8 15.7

FY10F 14.9 15.2 14.5 17.1 9.7 14.8 13.6 14.8

FY11F 15.0 14.9 14.3 17.1 10.2 15.0 13.3 15.6

Source : RHBRI for companies with FYE Mar & Jun, FY09, FY10F and FY11F refers to FY10, FY11 and FY12 respectively


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Table 4 : Valuation Summary

Maybank CIMB Grp PBB - L AMMB HLB EONC Affin AFG

Bloomberg Ticker MAY MK CIMB MK PBK MK AMM MK HLBK MK EON MK AHB MK AFG MK

Recommendation OP OP OP OP OP MP OP OP

EPS (sen)

FY09a 53.9 39.8 73.3 34.7 68.1 49.2 24.9 19.5

FY10F 61.9 48.0 82.0 41.9 70.8 60.8 32.4 25.1

FY11F 69.6 56.3 91.7 47.8 72.5 69.4 34.4 27.3

EPS growth (% y-o-y)

FY09a 42.6 37.5 (4.7) 9.8 9.1 155.0 27.0 30.6

FY10F 14.7 20.8 11.8 20.8 3.9 23.5 30.1 28.9

FY11F 12.4 17.2 11.8 14.1 2.3 14.3 6.4 9.0

PER (x)

FY09a 15.7 19.6 16.6 16.7 13.0 14.2 12.4 15.9

FY10F 13.7 16.2 14.8 13.8 12.5 11.5 9.5 12.4

FY11F 12.2 13.9 13.2 12.1 12.2 10.1 8.9 11.3

BVPS (RM/ s)

FY09a 3.94 2.88 3.12 3.20 4.07 5.13 3.17 1.90

FY10F 4.29 3.54 3.60 3.52 4.54 5.66 3.43 2.11

FY11F 4.70 3.92 4.04 3.85 5.03 6.28 3.71 2.34

P / BV (x)

FY09a 2.2 2.7 3.9 1.8 2.2 1.4 1.0 1.6

FY10F 2.0 2.2 3.4 1.6 1.9 1.2 0.9 1.5

FY11F 1.8 2.0 3.0 1.5 1.8 1.1 0.8 1.3

ROE (%)

FY09a 14.5 15.0 24.5 11.6 16.3 10.1 8.1 10.6

FY10F 15.0 15.2 24.2 12.5 15.1 11.3 9.8 12.5

FY11F 15.5 15.1 23.8 13.0 13.9 11.6 9.6 12.3

ROE / P BV (x)

FY09a 6.7 5.5 6.3 6.4 7.5 7.4 8.4 6.5

FY10F 7.6 6.9 7.2 7.6 7.8 9.1 10.9 8.5

FY11F 8.6 7.6 7.9 8.6 7.9 10.5 11.6 9.3

ROA (%)

FY09a 1.2 1.3 1.2 1.1 1.2 0.8 1.0 1.0

FY10F 1.2 1.4 1.3 1.3 1.2 0.9 1.1 1.2

FY11F 1.3 1.4 1.3 1.3 1.1 0.9 1.1 1.2

Net DPS (sen)

FY09a 41.3 9.3 41.3 9.4 18.0 0.0 6.4 6.4

FY10F 26.3 9.3 45.0 14.8 18.0 10.0 6.4 6.4

FY11F 29.3 9.3 48.8 16.8 18.0 10.0 6.4 6.4

Net dividend yield (%)

FY09a 4.9 1.2 3.4 1.6 2.0 0.0 2.1 2.1

FY10F 3.1 1.2 3.7 2.5 2.0 1.4 2.1 2.1

FY11F 3.4 1.2 4.0 2.9 2.0 1.4 2.1 2.1

For companies with FYE Mar & Jun, FY09, FY10F and FY11F refers to FY10, FY11 and FY12 respectivelySource : RHBRI


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IMP ORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment BankBerhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law.The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and maydiffer or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is notto be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated hereinin any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associatedpersons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investors individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the RHB Group) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

Connected Persons means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,

officers, employees and agents of each of them. Investors should assume that the Connected Persons are seeking or will seek investment banking or otherservices from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRIs previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the Connected Persons, including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the KLCI benchmark by greater than five percentage points over the next 6-12 months.

Chart 39 : AMMB Technical View P oint

The share price of AMMB hit an intraday high ofRM5.36 in Jan 2010, before reversing its uptrend

momentum and fell into a consolidation mode.

As it slipped to below the resistance level ofRM5.30, it plunged to a low of RM4.51 in Feb,

before eventually stabilising at above the RM4.84

support level.

But, since early Jun, the stock moved higher, alongthe supportive 10-day and 40-day SMAs and

penetrated the tough resistance level of RM5.30 in

mid-Aug.

After congesting near the RM5.50 level in therecent sessions, the stock launched another rally

with four consecutive bullish candles on the chart.

It hit a high of RM5.86, before closing at RM5.80

yesterday.

Technically, with the upbeat momentum readings,and the steady support near the 10-day SMA closer

to the technical level of RM5.50, the stock could

advance further towards the RM5.94 level in the

near term.

Should it manage to remove the tough RM5.94level, it could head towards the RM6.50 level next.

Strong support can be expected near the RM5.30 RM5.50 region.


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Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% ormore over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to takeon higher risks.

Market Perform = The stock return is expected to be in line with the KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommendedsecurities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever forthe actions of third parties in this respect.

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