Foreign Investors Flock to Malaysian Banks Amid Positive Earnings
Foreign investors record highest weekly net purchase in eight years, buying MYR 1.5 billion worth of Malaysian stocks in the past week. In its weekly fund flow report, MIDF Research noted that the financial services sector saw the highest net foreign inflow in, amounting to MYR 1.3 billion. The $Bursa Finance Services (0010I.BMS)$ has also recorded over a 20% increase year-to-date.
CIMB Securities reported that until last Wednesday, Aug 28, 80% of the banks posted Q2 2024 earnings that exceeded expectations. Below are the highlights of Malaysia's bank giants' earnings data.
![Foreign Investors Flock to Malaysian Banks Amid Positive Earnings](https://sgsnsimg.moomoo.com/sns_client_feed/101000104/20240904/c0b77a679ad33b0e31f0e0d204919eda.png/big?area=101&is_public=true)
Among the Malaysian bank giants illustrated in the chart, $MAYBANK (1155.BMS)$ reported a revenue of MYR 7.34 billion, marking a modest 0.47% YoY increase, while its net profit rose by 8.17% YoY to MYR 2.52 billion. $PBBANK (1295.BMS)$'s revenue grew by 6.18% YoY to MYR 3.41 billion, with a net profit increase of 10.08% YoY, reaching MYR 1.78 billion, and an impressive ROE of 12.4%. $CIMB (1023.BMS)$ achieved a 5.04% YoY rise in revenue to MYR 5.60 billion, and its net profit climbed 10.60% YoY to MYR 1.96 billion, despite having the highest NPL ratio at 2.5%. $RHBBANK (1066.BMS)$ saw the highest revenue growth at 12.37% YoY, totaling MYR 2.11 billion, though its net profit decreased by 10.68% YoY to MYR 0.72 billion. Notably, RHB Bank offered the highest dividend yield at 6.54% and maintained the strongest CET 1 Ratio at 16.9%.
Among these banks, Public Bank stood out with the lowest NPL ratio of 0.6% and the highest ROE, reflecting robust asset quality and profitability. Across these giants, NIMs ranged from 1.9% to 2.2%, indicating stable net interest margins in a competitive environment.
The bank giants have shown impressive performance in dividend yield. Below are the top ten high-dividend stocks in the KLCI index, with four from the financial sector: RHBBANK, MAYBANK, CIMB, and PBBANK, which have achieved capital returns ranging from 14% to 46% year-to-date.
![Foreign Investors Flock to Malaysian Banks Amid Positive Earnings](https://sgsnsimg.moomoo.com/sns_client_feed/101000104/20240904/24fda85352087add12e22a7d63dc46e7.jpg/big?area=101&is_public=true)
Previously, the positive factors for the banking sector have been outlined, including:
1)Stronger-than-expected GDP growth in the second quarter. Malaysia's GDP grew by 5.9% year-on-year, surpassing Bloomberg's survey and official estimates of 5.8%. Furthermore, the Malaysian Ringgit continues to outperform other Asian currencies. Year-to-date, the Ringgit has accumulated a gain of approximately 5.0% amid significant inflows of funds.
2)Bank Negara Malaysia maintains OPR at 3.0% with low inflation risks. Datuk Abdul Rasheed Ghaffour, the Governor of Bank Negara Malaysia, mentioned that due to recent changes in diesel subsidies, inflation is expected to rise in the second half of 2024. However, the expected rise in inflation should be manageable as measures have been taken to limit the impact of subsidy adjustments on business costs.
3)Malaysian banks receive strong government support to expand AI adoption. Lee Lai Fong, the Chief Information Officer of National Savings Bank, mentioned that the government is leading the development of a national AI roadmap (Al Roadmap) to enhance data accuracy and efficiency through AI, thereby increasing business volume.
What's Next?
CIMB Securities has raised the earnings forecasts for various banks to reflect lower funding cost projections. Additionally, the firm added, "We will be reviewing our KLCI valuation model after the results season to reflect the higher bank earnings, which will likely be positive for overall earnings growth."
CGS noted that despite recent valuation increases in Malaysian banks, they remain attractive with a 2025 P/E ratio of 11 times. The firm's top picks in the banking sector are Hong Leong Bank and Public Bank.
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