With expectations of stable economic growth momentum, steady bank margins and relatively benign credit costs, Maybank IB projects a stable operating profit and net profit growth of 5.9% respectively in 2025E, for the banks under its coverage. ROAEs are projected to average 10.5% and dividend yields of >5% provide support. Top picks include AMMB, CIMB and PBK.
Operating and net profit growth of 5.9%
Against the group's GDP growth expectations of 4.9% in 2025E, the house forecasts domestic loan growth of 5.5%, led by a pick-up in business loans. Deposit competition is expected to be more rational, and with expectations of no OPR cuts, Maybank IB expects NIMs to be stable. NOII growth is likely to taper off amid lower forex and bond market volatility, especially
since US Fed rate cuts are expected to be more gradual. Credit costs, nevertheless, are expected to remain fairly benign amid sustained economic momentum and the availability of management overlay buffers at most banks. It also forecasts aggregate 2025E operating profit and net profit growth of 5.9% respectively, as well as an average ROE of 10.5%.
Valuations still undemanding
Banking sector PERs (on a one-year forward rolling basis) have been on the decline since hitting a peak of 14x in July 2019, just before the pandemic. Valuations recovered somewhat in 2024, and average about 10.1x currently. Even so, valuations are still below the long-term (since Jan 2009) mean of 11.3x. We find that all banking stocks are currently trading below their historical mean PER valuations, with HLBK and PBK at around -1SD to mean.
Top 3 picks – AMMB, CIMB & PBK
The house has a BUY call on ABMB, AMMB, CIMB, HLBK, HLFG and PBK but the top 3 picks would be AMMB, CIMB and PBK. AMMB's focus on proactive funding cost management and business banking operations should contribute to growth momentum, as it strives for higher dividend payouts. CIMB's operations in Indonesia and Singapore are strong contributors, while a turnaround of CIMB Thai would enhance earnings. Public Bank is well-managed and its MYR1.5b management overlays should keep credit costs low. The acquisition of LPI Capital enhances non-interest income and Maybank IB thinks that concerns over a share overhang are overblown.
