Thursday 28 Mar 2024
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KUALA LUMPUR (March 16): CGS-CIMB Research is projecting a stronger core net profit growth of 17.8% for banks, mainly driven by the non-recurrence of the Cukai Makmur taxation. 

Another earnings catalyst for banks for this year would be higher non-interest income with a projected growth of 13.9% versus a decline of 1.5% in 2022, due to the normalisation of investment income, said its analyst Winson Ng in a note on Thursday (March 16). 

“We envisage two challenges for banks in 1QFY23F, namely: potential quarter-on-quarter compression in net interest margin, mainly due to the upward repricing of fixed deposit rates, and high growth (circa 10% year-on-year) in overheads,” Ng said. 

“Notwithstanding these, we still expect positive growth in banks’ 1Q23F core net profit of 9%-11% year-on-year, underpinned by: the absence of Cukai Makmur taxation, and higher non-interest income,” he added. 

Touching on the collapse of Silicon Valley Bank, Ng said it would have minimal impact on the local banks’ earnings due to their negligible exposure to the US. 

“Hence, the recent sell-down of banking stocks would represent buying opportunities for banks, in our view. Our sector top picks are RHB Bank, Hong Leong Bank and Public Bank,” said the analyst. 

It has “add” calls for the three banking stocks — RHB Bank Bhd, Hong Leong Bank Bhd and Public Bank Bhd — with target prices of RM7.62, RM25.30 and RM5.20. 

Overall, CGS-CIMB has maintained its overweight call on banks on higher non-interest income growth, and potential writeback in management overlay. 

Edited BySurin Murugiah
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