KUALA LUMPUR (June 9): UOB Kay Hian said today the current risk-reward balance of Malaysian banks is attractive, and that the sector’s current consolidation phase provides an excellent opportunity for investors to accumulate banking shares after taking into account no major upside risk to Covid-19 pandemic-driven bad loan provisions and expectations that a swifter roll-out of Covid-19 vaccination will help spur economic recovery.

UOB Kay Hian analyst Keith Wee Teck Keong wrote in a note today that CIMB Group Holdings Bhd remains as the research house’s top pick for the Malaysian banking sector.

"We are maintaining our view that credit cost will continue to improve in 2021 versus 2020 despite the recent lockdown and high number of Covid-19 cases. Valuations also remain attractive at -1SD (standard deviation) to historical mean P/B (price-to-book ratio). 

"We maintain 'overweight' [on the Malaysian banking sector],” Wee said.

On CIMB, he said that given its strong earnings growth off a low base, attractive valuations, large market capitalisation and liquid high-beta nature, UOB Kay Hian continues to believe that CIMB is best positioned within the sector to benefit from the economic recovery and reopening theme, which UOB Kay Hian expects the market to revisit towards the fourth quarter of 2021 (4Q21) as the mass Covid-19 vaccination roll-out gains traction.

"We also like Hong Leong Bank Bhd (HLB) and Public Bank Bhd given their solid asset quality track record, and RHB Bank Bhd for its strong capital position and well-balanced growth,” he said.