[Unchanged] Some hits and misses · RHB Bank HOLD 4.93 20,692 5.30 10.1 9.7 1.0 0.9 9.8 9.6 3.0 3.1...

September 5, 2016

Banks

Mala

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THIS REPORT HAS BEEN PREPARED BY MAYBANK INVESTMENT BANK BERHAD

SEE PAGE 26 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

PP16832/01/2013 (031128)

Malaysia Banking

Some hits and misses

Expecting a better second half

2H16 is generally expected to be a better, with an aggregate 11% HoH

increase in earnings, driven by factors such as possible provision write-

backs on R&R loans, improved contributions from overseas operations

and further cost savings. We project cumulative core earnings growth of

2% in 2016 and 4% in 2017, with ROEs of 10.4% and 10.3% respectively.

NEUTRAL still on the sector with BUYs on BIMB, AFG and HL Bank.

A decent quarter

2Q16 results were generally within expectations - BIMB surprised

positively but RHB and Maybank disappointed on the back of higher

impairment allowances. 2Q16 cumulative operating profit of banks under

our coverage expanded a decent 7% YoY but core net profit contracted a

marginal 1%. 1H16 core net profit declined 4% YoY. Positively, NIMs were

stable while liquidity was ample. NOII expanded at a stable pace of 5%

YoY in 2Q16 and strict cost controls contributed to positive JAWS. On the

flip side, asset quality deteriorated and credit costs were higher.

Trimming industry loan growth Loan growth continues to moderate and we further lower our 2016

domestic industry loan growth forecast for 2016 to 5.3% from 6%

previously and we estimate a similar growth of 5.3% for 2017 versus 5.6%

previously. NIMs are likely to resume contracting in 2H16, post the 13

July OPR cut and we have assumed an average 6bps contraction in 2016

(1H16: -1bp YoY) before stabilizing in 2017. Asset quality remains a

concern and we expect credit costs to normalize higher.

2% core earnings growth in 2016, 4% in 2017

All in, our earnings revisions for the respective banks have led to lower

2016 cumulative operating profit growth forecast of 4.0% from 5.0%,

while core net profit growth is unchanged at 2.1% (0% growth in 2015).

Cumulative operating profit growth for 2017 is now 6.6% from 6.0%

previously while core net profit growth is estimated to be marginally

higher at 4.4% versus 4.0% previously. We expect average ROEs (ex-

exceptionals) to slip to 10.4% in 2016, 10.3% in 2017 from 11.4% in 2015.

Analyst

[Unchanged]NEUTRAL

Desmond Ch'ng, ACA

(603) 2297 8680

[email protected]

Stock Rec Shr px Mkt cap TP PER (x) PER (x) P/B (x) P/B (x) ROAE (%) ROAE (%) Net yield Net yield

(MYR) (MYR m) (MYR) CY16E CY17E CY16E CY17E CY16E CY17E CY16E CY17E

AFG BUY 3.90 6,298 4.60 11.2 11.0 1.2 1.1 10.8 10.4 3.9 4.0

AMMB HOLD 4.28 13,383 4.40 9.7 9.4 0.8 0.8 8.5 8.5 4.0 4.3

CIMB HOLD 4.77 37,709 4.70 11.4 10.7 0.9 0.9 8.6 8.6 3.8 4.0

HL Bank BUY 13.10 27,171 15.00 12.5 12.5 1.3 1.2 10.0 10.0 3.2 3.3

Maybank * NR 7.75 81,271 NR 12.6 12.5 1.3 1.2 9.6 9.9 6.1 6.1

Public Bank HOLD 19.90 74,913 19.70 15.0 14.4 2.2 2.0 15.5 14.6 3.0 3.1

RHB Bank HOLD 4.93 20,692 5.30 10.1 9.7 1.0 0.9 9.8 9.6 3.0 3.1

Simple avg 261,436 11.8 11.5 1.2 1.2 10.4 10.2 3.8 4.0

MC-wtd 12.7 12.4 1.4 1.4 11.2 11.0 4.2 4.3

BIMB BUY 4.02 6,498 4.70 11.2 10.9 1.5 1.4 14.6 13.2 3.0 3.1

HLFG HOLD 16.00 17,179 17.10 11.0 10.5 1.2 1.1 10.1 9.6 2.4 2.5

* Consensus estimates Source: Maybank KE

Banking Sector – Peer Valuation Summary

September 5, 2016 2

Malaysia Banking

2Q 2016 results round-up

Fairly decent results

The 2Q16 results season was fairly decent in that most banks reported results

that were in line with expectations. The two that surprised negatively were RHB

and Maybank, on account of fairly sizeable impairment provisions against their

bond exposures to Swiber Holdings (SWIB SP; Not Rated). Maybank’s credit costs

were also higher on the back of a rise in restructured & rescheduled (R&R) loans.

Surprising positively was BIMB, on the back of lower-than-expected credit costs.

Cumulative core earnings down YoY

2Q16 cumulative operating profit rose 7% YoY but higher loan loss allowances led

to core net profit contracting 1% YoY. Positively, the sector continued to register

positive JAWS during the quarter, with operating income expanding at a faster

pace (+5% YoY) to operating expenses (+4% YoY). Cumulative 1H16 core earnings

declined 4% YoY with the drag emanating principally from higher loan loss

allowances during the period (+63% YoY).

To note that the results table below strip out one-offs, i.e. impairment provisions

pertaining to bond exposures to Swiber of about MYR250m at RHB and MYR200m

at Maybank in 2Q16. Including these provisions, 2Q16 cumulative headline net

profit declined 9% YoY (-6% QoQ) and 1H16 cumulative headline net profit was 8%

weaker YoY.

Cumulative core earnings for seven banks (stripping out large exceptionals)

Quarterly Cumulative

Year end: Dec (MYR'm) 2Q16 2Q15 YoY chg 1Q16 QoQ chg 6M16 6M15 YoY chg

Interest income 18,495 17,616 5 18,801 (2) 37,296 35,119 6

Interest expense (9,445) (9,008) 5 (9,685) (2) (19,130) (18,019) 6

Net interest income 9,050 8,608 5 9,116 (1) 18,166 17,100 6

Islamic banking income 2,296 2,157 6 2,242 2 4,538 4,239 7

Non-interest income 4,305 4,088 5 4,131 4 8,436 8,358 1

Operating income 15,652 14,854 5 15,489 1 31,140 29,698 5

Operating expenses (7,524) (7,228) 4 (7,595) (1) (15,119) (14,523) 4

Operating profit 8,128 7,625 7 7,893 3 16,021 15,175 6

Loan loss allowance (1,631) (1,032) 58 (1,463) 11 (3,095) (1,893) 63

Other provisions (39) (69) (43) (37) 6 (76) (69) 12

Associate contributions 165 222 (26) 189 (13) 354 380 (7)

Core pretax profit 6,622 6,747 (2) 6,582 1 13,204 13,593 (3)

Taxation (1,481) (1,534) (3) (1,551) (4) (3,032) (3,058) (1)

Minority interest (97) (95) 2 (88) 9 (185) (161) 15

Core net profit 5,045 5,118 (1) 4,943 2 9,987 10,374 (4)

Sources: Companies, Maybank KE

The table above sums up earnings for seven banks: Maybank, CIMB, Public Bank, HL Bank, RHB Bank, AMMB Holdings and Alliance Financial Group.

September 5, 2016 3

Malaysia Banking

Operational performance was decent

Three banks fared well operationally, with a double digit expansion in their 1H16

operating profit – RHB (+16% YoY), Maybank (+11% YoY), AFG (+10% YoY). RHB’s

profit expansion was driven predominantly by cost savings arising from its CTS

scheme while Maybank saw robust growth in non-interest income (NOII), spurred

on by higher marked-to-market investment gains. AFG’s earnings were higher YoY

on the back of NIM expansion and strict cost control.

AMMB’s operating performance continued to be the weakest, with a 31% YoY

plunge in operating profit. Topline was impacted by a sizeable 30bps decline in

NIM, as well as weaker NOII. Operating expenses meanwhile rose 13% YoY.

At the pretax profit level (ex-exceptionals), outperformers were RHB (+16% YoY)

and AFG (+14% YoY) on stable credit costs while AMMB’s bottomline (-25% YoY)

contracted less than its operating line (-31% YoY), supported by ongoing credit

recoveries. Maybank’s earnings took a dramatic turn, declining 15% YoY, on the

back of a threefold increase in loan loss allowances to cover R&R loans that arose

and which were classified as impaired during the period.

Cumulative calendarised core earnings for the seven banks (stripping out large exceptionals)

Quarterly Cumulative

Year end: Dec (MYR'm) 2Q16 2Q15 YoY chg 1Q16 QoQ Chg 6M16 6M15 YoY chg

Operating income

Maybank 5,346 4,888 9% 5,392 (1%) 10,738 9,876 9%

CIMB 3,903 3,833 2% 3,725 5% 7,628 7,514 2%

Public Bk 2,425 2,313 5% 2,504 (3%) 4,929 4,578 8%

AMMB 947 964 (2%) 901 5% 1,847 2,024 (9%)

HL Bank 1,079 996 8% 1,002 8% 2,081 1,984 5%

RHB 1,589 1,515 5% 1,612 (1%) 3,201 3,052 5%

AFG 364 344 6% 353 3% 717 669 7%

15,652 14,854 5% 15,489 1% 31,140 29,698 5%

Operating profit

Maybank 2,722 2,470 10% 2,772 (2%) 5,494 4,968 11%

CIMB 1,812 1,710 6% 1,588 14% 3,401 3,254 5%

Public Bk 1,622 1,591 2% 1,716 (5%) 3,337 3,153 6%

AMMB 411 476 (14%) 280 47% 691 1,004 (31%)

HL Bank 585 525 11% 530 10% 1,115 1,063 5%

RHB 781 676 15% 835 (7%) 1,616 1,399 16%

AFG 195 177 10% 172 13% 367 333 10%

8,128 7,625 7% 7,893 3% 16,021 15,175 6%

Core pretax profit

Maybank 1,784 2,150 (17%) 1,931 (8%) 3,715 4,392 (15%)

CIMB 1,189 1,200 (1%) 1,123 6% 2,312 2,226 4%

Public Bk 1,552 1,531 1% 1,652 (6%) 3,203 3,020 6%

AMMB 479 482 (1%) 342 40% 821 1,089 (25%)

HL Bank 724 628 15% 607 19% 1,331 1,291 3%

RHB 719 594 21% 755 (5%) 1,475 1,272 16%

AFG 175 161 9% 172 2% 347 304 14%

6,622 6,747 (2%) 6,582 1% 13,204 13,593 (3%)

Core net profit

Maybank 1,360 1,585 (14%) 1,427 (5%) 2,786 3,285 (15%)

CIMB 873 877 (0%) 814 7% 1,687 1,659 2%

Public Bk 1,256 1,197 5% 1,230 2% 2,486 2,368 5%

AMMB 323 340 (5%) 280 15% 603 797 (24%)

HL Bank 559 538 4% 498 12% 1,056 1,057 (0%)

RHB 542 461 18% 565 (4%) 1,107 974 14%

AFG 132 122 9% 130 2% 262 234 12%

5,045 5,118 (1%) 4,943 2% 9,987 10,374 (4%)

Sources: Companies, Maybank KE

September 5, 2016 4

Malaysia Banking

Moderating loan growth

Cumulative gross loan growth for the seven banks moderated to 5.8% end-Jun

2016 from 6.3% YoY end-Mar. Maybank and CIMB’s loan growth continued to be

inflated by the weakness of the MYR, with overseas loans accounting for 43% and

45% of their total loans portfolio as at end-Jun 2016. Maybank’s 1Q16 loan growth

would have been just 1.6% ex-forex instead of 4.3% YoY while CIMB’s loan growth

would have been 3.9% instead of 6.5% YoY. Public Bank’s loan growth continued

to outpace its peers due to still robust demand for housing and commercial

property loans in Malaysia (92% of its loan book is domestic).

On a QoQ basis, cumulative loans resumed growth of 1.9% YoY, having contracted

1.6% YoY in 1Q16. AFG and AMMB were the exceptions, with QoQ loan

contractions during the period – AFG because of the front loading of SME loans in

1Q16, while in the case of AMMB, decent growth in the mortgage (+16% YoY) and

SME (+7% YoY) books was offset by a 7% and 3% YoY contraction in auto and

credit card loans respectively.

Cumulative domestic loan growth for the seven banks was relatively stable at

5.6% YoY end-Jun 2016. This was in line with the industry’s loan growth of 5.6%.

Total loans – YoY growth

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 14.2% 15.6% 20.1% 12.3% 5.7% 4.3%

CIMB 12.5% 16.1% 19.3% 12.5% 7.1% 6.5%

Public Bk 11.7% 11.5% 12.9% 11.6% 9.5% 9.5%

AMMB -1.6% -2.2% 0.3% -0.7% 0.1% 1.6%

HL Bank 8.8% 8.9% 11.5% 9.9% 7.4% 6.3%

RHB 13.7% 9.2% 10.0% 6.2% 4.2% 4.8%

AFG 14.7% 12.5% 10.2% 8.5% 4.9% 3.0%

Total 11.7% 12.2% 15.0% 10.3% 6.3% 5.8%

Source: Companies, Maybank KE

Total loans – QoQ growth

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 2.1% 3.5% 7.4% -1.1% -3.9% 2.1%

CIMB 2.1% 3.5% 6.5% 0.0% -2.8% 2.9%

Public Bk 3.3% 2.3% 3.6% 2.0% 1.4% 2.3%

AMMB 0.4% -2.5% 1.4% 0.0% 1.2% -1.0%

HL Bank 3.1% 2.6% 2.6% 1.3% 0.7% 1.5%

RHB 0.7% 0.8% 3.4% 1.2% -1.2% 1.4%

AFG 3.6% 1.1% 1.7% 1.8% 0.3% -0.7%

Total 2.2% 2.4% 5.1% 0.3% -1.6% 1.9%


Domestic loans – YoY growth

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 10.1% 10.3% 10.4% 6.0% 3.1% 4.0%

CIMB 9.3% 10.7% 11.2% 9.2% 7.2% 7.3%

Public Bk 10.9% 10.5% 10.9% 10.3% 9.5% 9.1%

AMMB -1.6% -2.2% 0.3% -0.7% 0.1% 1.6%

HL Bank 8.9% 8.3% 10.2% 8.6% 6.3% 5.4%

RHB 10.2% 6.2% 6.6% 4.4% 4.1% 3.9%

AFG 14.7% 12.5% 10.2% 8.5% 4.9% 3.0%

Total 9.1% 8.6% 9.2% 7.1% 5.7% 5.6%


September 5, 2016 5

Malaysia Banking

NIMs still holding up

Managing NIMs has never been more important in an environment of moderating

loan growth and the banks have done an admirable job with regards to this. NIMs

have been relatively steady over the past few quarters already, certainly

outperforming managements’ guidance thus far.

On a QoQ basis, Maybank saw the largest NIM compression of about 11bps, given

that it had normalized product pricing in 2Q16 after having raised it on certain

products in 1Q16. Public Bank and RHB saw their NIM compressed by a fairly

marginal 3bps QoQ while the other banks managed to expand theirs, including

AMMB, which saw reprieve in 2Q16. AFG’s NIM expanded the most QoQ (+10bps)

followed by HL Bank (+4bps).

On a YoY basis, AMMB’s NIM has declined a sharp 18bps due to factors such as (i)

the ongoing portfolio rebalancing of the auto book, and (ii) asset repricing with

the addition of better quality mortgages and corporate loans at lower yields.

That most of the other banks were able to improve their margins YoY may be

attributed to factors such as (i) asset repricing, (ii) a focus on higher yielding

loans, particularly in the SME sector, and (ii) the shedding of more expensive

fixed deposits.

Net interest margins

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15 (ppt)

Maybank 2.28% 2.38% 2.29% 2.34% 2.23% -0.05%

CIMB 2.61% 2.68% 2.66% 2.62% 2.63% 0.02%

Public Bk 2.11% 2.16% 2.19% 2.20% 2.17% 0.06%

AMMB 2.12% 2.12% 1.94% 1.92% 1.94% -0.18%

HL Bank 1.92% 1.94% 1.96% 1.91% 1.95% 0.03%

RHB 2.13% 2.13% 2.15% 2.22% 2.19% 0.06%

AFG 2.16% 2.19% 2.15% 2.12% 2.22% 0.06%

Average 2.19% 2.23% 2.19% 2.19% 2.19% 0.00%


Quarterly NIM (1Q09 – 2Q16)


2.00%

2.10%

2.20%

2.30%

2.40%

2.50%

2.60%

2.70%

2.80%

2.90%

3.00%

1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 3Q13 2Q14 1Q15 4Q15

September 5, 2016 6

Malaysia Banking

Liquidity positions stable in 2Q16

Liquidity positions were fairly stable across the board except for CIMB and AMMB,

which saw a more visible QoQ rise in their loan/deposit ratios (LDR) to 94% and

100% respectively.

In the case of AMMB, total deposits contracted 8.6% QoQ on account of the

shedding of more expensive fixed deposits. The consolation, however, is that

CASA expanded in contributions to 24.5% of total deposits from 20.7% end-Mar

2016. As a result, the group’s share of industry CASA rose to 4.6% end-Jun 2016

from 4.4% end-Mar 2016.

CIMB saw loan growth outpace deposit growth in Malaysia while in Indonesia and

Thailand, deposits contracted 4% YoY and 6% YoY respectively. Singapore on the

other hand, saw deposits grow at a rapid pace of 19% YoY versus a loan

contraction of 4% YoY.

Gross loans/customer deposits

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 95.4% 96.6% 92.7% 89.9% 88.5%

CIMB 94.9% 95.7% 93.8% 91.3% 94.1%

Public Bk 87.6% 90.5% 90.8% 90.4% 91.0%

AMMB 95.3% 97.3% 95.6% 97.3% 100.3%

HL Bank 80.9% 81.0% 81.5% 81.3% 81.2%

RHB 92.1% 94.1% 95.7% 95.0% 92.4%

AFG 85.1% 86.2% 88.8% 84.2% 85.7%

Average 91.7% 93.2% 91.9% 90.3% 90.4%


There are two new liquidity ratios that BNM has started releasing on a monthly

basis, which are the loan/fund ratio (LFR) and the loan/fund and equity ratio

(LFER). The denominator for the LFR comprises customer deposits and all debt

instruments (including subordinated debt, debt certificates/sukuk issued,

commercial paper and structured notes). The denominator for the LFER adds on

ordinary and preferred shares, share premium and retained earnings.

Focusing on just the LFR, we estimate the average gross LFR for the seven banks

to have improved to be marginally higher at 83.6% end-Jun 2016 versus 83.3%

end-Mar. Of the seven banks, AMMB has the largest percentage of borrowings to

total funds at 12.7%, followed by Maybank (9.6%) and CIMB (9.4%). With the

exception of Maybank and AMMB, there was a decline in the ratio of debt to total

funds across the board in 2Q16.

Gross loan/fund ratios

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 86.9% 87.1% 83.2% 81.5% 80.0%

CIMB 85.4% 86.0% 84.7% 82.6% 85.3%

Public Bk 84.3% 87.0% 87.4% 86.8% 87.5%

AMMB 83.0% 84.2% 82.8% 85.1% 87.6%

HL Bank 76.1% 76.5% 77.3% 77.8% 78.8%

RHB 85.4% 87.0% 88.8% 88.1% 86.8%

AFG 83.9% 85.0% 85.2% 80.9% 83.4%

Average 84.6% 85.7% 84.3% 83.3% 83.6%


September 5, 2016 7

Malaysia Banking

Borrowings as % of funds (customer deposits plus borrowings)

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 9.0% 9.8% 10.3% 9.4% 9.6%

CIMB 9.9% 10.2% 9.7% 9.5% 9.4%

Public Bk 3.8% 3.8% 3.7% 3.9% 3.9%

AMMB 13.0% 13.4% 13.4% 112.5% 12.7%

HL Bank 5.9% 5.6% 5.2% 4.3% 3.0%

RHB 7.3% 7.5% 7.3% 7.2% 6.1%

AFG 1.4% 1.4% 4.0% 3.9% 2.6%

Average 7.7% 8.1% 8.2% 7.7% 7.5%


Shedding more expensive fixed deposits

Aggregate customer deposits expanded at a faster rate of 7.3% YoY end-Jun 2016

versus +6.4% YoY end-Mar 2016. Deposit growth outpaced loan growth on an

aggregate basis, but on an individual bank basis, only Maybank and CIMB

witnessed this occurrence, while the other banks had loan growth that outpaced

deposit growth.

Maybank’s deposit growth was a strong 12.5% YoY (+9.8% YoY ex-forex) driven by

strong deposit accumulation in Singapore (+18% YoY), while the pace was more

tempered in Malaysia (+7.5% YoY) and Indonesia (+7.0% YoY).

Customer deposits growth (YoY chg)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 13.0% 11.5% 14.5% 12.8% 9.9% 12.5%

CIMB 12.1% 9.7% 18.0% 12.6% 6.9% 7.3%

Public Bk 10.2% 11.6% 10.4% 8.9% 7.4% 5.5%

AMMB 2.7% 3.3% 4.6% 1.0% -1.9% -3.5%

HL Bank 7.0% 7.7% 10.5% 9.5% 7.0% 5.9%

RHB 10.8% 5.1% 7.3% 0.6% -0.8% 4.4%

AFG 13.7% 10.8% 8.1% 5.0% 3.2% 2.3%

Average 10.8% 9.6% 12.4% 9.4% 6.4% 7.3%


Most banks gained momentum on their individual deposits during the quarter,

particularly HL Bank, whereby individual deposits as a percentage of total

deposits has risen 4.7%-points over the past year and at 54.8%, it is way ahead of

its peers in its proportion of “sticky” deposits. Positively, AMMB regained some of

the market share it lost during the past year, with a strong QoQ growth in

individual deposits.

AFG has lost about 2.4%-points over the past year and its proportion of individual

deposits in its mix is now the second lowest among the seven banks (just ahead

of RHB). This may be attributed in part to its focus on SME lending that has

resulted in faster growth in business deposits but at some point, it will have to

arrest the decline in its share of individual deposits which are deemed to be

stickier in nature and which would serve to enhance its liquidity coverage ratios.

September 5, 2016 8

Malaysia Banking

Individual deposits as % of total deposits

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15 (ppt)

Maybank 41.2% 41.2% 40.3% 41.1% 40.6% -0.6%

CIMB 40.1% 40.5% 40.1% 39.8% 41.7% 1.6%

Public Bk 46.7% 48.5% 48.3% 48.1% 48.8% 2.1%

AMMB 39.6% 39.8% 38.7% 38.6% 39.7% 0.0%

HL Bank 50.1% 49.2% 49.5% 53.5% 54.8% 4.7%

RHB 27.5% 27.4% 28.7% 29.6% 28.7% 1.2%

AFG 40.9% 40.3% 40.0% 39.6% 38.6% -2.4%

Average 41.4% 41.7% 41.4% 42.0% 42.4% 1.1%


Almost all banks saw a YoY decline in their share of business deposits, mainly

because most were deliberately shedding their more expensive fixed deposits.

AFG saw its business deposits ratio rise 3.5%-points YoY but as mentioned earlier,

this is because of its focus on SME lending, that has driven the corresponding

deposits.

Business enterprise deposits as % of total deposits

2Q15 3Q15 4Q15 1Q16 2Q16

2Q16 vs 2Q15 (ppt)

Maybank 44.9% 45.7% 44.8% 42.0% 41.0% -3.9%

CIMB 39.3% 37.6% 39.0% 38.6% 36.2% -3.1%

Public Bk 28.5% 28.3% 29.9% 28.1% 28.1% -0.4%

AMMB 44.4% 44.4% 45.8% 44.8% 44.3% -0.1%

HL Bank 46.4% 47.5% 47.7% 43.8% 42.2% -4.1%

RHB 60.8% 61.7% 61.3% 60.9% 61.2% 0.5%

AFG 30.6% 31.8% 33.3% 31.9% 34.1% 3.5%

Average 41.9% 42.0% 42.4% 40.5% 39.7% -2.2%


Decent CASA growth

Against total deposit growth of 7.3% YoY, CASA grew at a slower pace of 5.1% YoY

in 2Q16. On an individual bank basis, CASA expanded at a faster pace to total

deposit growth for CIMB, AMMB and RHB. AMMB and RHB in particular, saw

impressive YoY CASA growth of 13.2% and 10.6% respectively in 2Q16, which

resulted in improved CASA ratios during the period. CIMB’s CASA ratio was the

highest among peers at 35.5%, largely on account of strong CASA accumulation in

Indonesia.

YoY change in CASA

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 11.5% 9.2% 15.4% 4.1% -1.2% 3.0%

CIMB 8.6% 12.0% 14.8% 10.4% 10.9% 7.6%

Public 7.9% 6.8% 8.7% 5.6% 0.7% 3.5%

AMMB -0.1% -0.3% 10.0% 0.5% 0.0% 13.2%

HL Bank 6.3% 5.3% 4.8% 8.5% 1.1% 3.6%

RHB 4.8% 5.5% 11.0% 11.0% 7.4% 10.6%

AFG 12.5% 10.1% 3.3% 5.7% -1.5% -2.5%

Average 8.7% 8.4% 12.2% 6.6% 2.9% 5.1%


September 5, 2016 9

Malaysia Banking

CASA as % of total deposits

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15 (ppt)

Maybank 35.0% 34.8% 32.5% 31.8% 32.0% -3.0%

CIMB 35.4% 34.4% 34.4% 35.6% 35.5% 0.1%

Public Bk 24.1% 24.7% 24.2% 23.4% 23.6% -0.5%

AMMB 20.9% 21.1% 20.4% 20.7% 24.5% 3.6%

HL Bank 25.6% 24.9% 25.5% 24.4% 25.0% -0.5%

RHB 23.4% 23.3% 24.0% 24.1% 24.8% 1.4%

AFG 34.5% 33.6% 35.0% 32.1% 32.9% -1.6%

Average 29.9% 29.8% 29.1% 28.8% 29.3% -0.6%


Fee income continues to contract

Aggregate fee income continued to contract in 2Q16, declining 4% YoY, dragged

by the bigger banks. Positively, AMMB finally arrested the decline in fee income,

with growth in loan-related fees during the quarter. AFG saw its 2Q16 fee income

expand 16% YoY, with growth across most of the key segments, particularly

commissions. HL Bank’s 2Q16 fee income rose 10% YoY coming mainly from

higher loan-related and credit card fees.

Fee income growth (YoY chg)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 19% 5% -9% 0% -4% -8%

CIMB 6% 8% 5% -4% -14% -6%

Public Bk 15% 12% 10% 13% 3% -2%

AMMB -9% -16% -20% -16% -29% 6%

HL Bank 28% 1% -2% -7% 12% 10%

RHB -2% 6% -19% -21% -2% -6%

AFG 5% -9% -29% 3% 7% 16%

Average 11% 5% -6% -4% -5% -4%


As a result of the contraction in aggregate fee income, fee income declined to

15.1% of total income in 2Q16 from 15.4% in 1Q16 and 16.6% in 2Q15. RHB

presently has the highest ratio of fee income among its peers at close to 19%.

Fee income as % of total income & YoY ppt change

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15 (ppt)

Maybank 19.4% 15.6% 19.7% 16.7% 16.3% -3.0%

CIMB 12.7% 12.4% 11.7% 12.3% 11.7% -1.0%

Public Bk 16.8% 15.8% 16.9% 15.2% 15.8% -1.0%

AMMB 14.4% 14.2% 14.8% 13.3% 15.5% 1.2%

HL Bank 14.5% 13.8% 14.4% 16.3% 14.7% 0.2%

RHB 21.3% 20.3% 21.4% 19.2% 18.7% -2.2%

AFG 12.4% 11.9% 13.0% 12.8% 13.6% 1.2%

Average 16.6% 15.1% 16.6% 15.4% 15.1% -1.5%


September 5, 2016 10

Malaysia Banking

Robust growth in NOII

Other non-interest income (NOII) expanded 19% YoY in 2Q16, led predominantly

by strong growth at Maybank, HL Bank and RHB. Maybank’s 89% YoY jump in

other NOII was driven by MTM investment gains in 2Q16, as opposed to losses in

1Q15 while HL Bank benefited from strong forex flows. Public Bank’s other NOII

dropped 30% YoY due to lower forex and dividend income.

Other income growth (YoY chg)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 14% -18% 159% -37% 19% 89%

CIMB -2% 62% 3% 59% -25% 0%

Public Bk 18% 23% 92% -12% 34% -30%

AMMB 61% -1% -23% 11% 3% 8%

HL Bank 81% 10% 140% 211% -17% 51%

RHB 12% 27% -40% -2% -12% 21%

AFG -60% -3% 117% 8% 86% -1%

Average 12% 20% 34% 3% -1% 19%


Cumulatively, total NOII (including fee income) provided support to overall

topline growth, and expanded to 27.5% of total income in 2Q16, after having

dipped to 26.6% in 1Q16.

Total non-interest income as % of total income & YoY ppt change

2Q15 3Q15 4Q15 1Q16 2Q16 1Q16 vs

1Q15 (ppt)

Maybank 25.4% 28.3% 28.5% 28.0% 26.8% 1.4%

CIMB 30.4% 27.0% 28.8% 24.3% 29.1% -1.3%

Public Bk 23.5% 25.5% 22.2% 23.6% 20.3% -3.3%

AMMB 34.6% 32.1% 32.8% 35.8% 37.7% 3.2%

HL Bank 23.5% 24.3% 25.9% 23.3% 27.3% 3.8%

RHB 32.8% 29.6% 34.1% 29.7% 32.0% -0.4%

AFG 22.7% 25.1% 22.7% 22.8% 23.2% 0.5%

Average 27.6% 27.6% 28.2% 26.6% 27.5% 0.0%


Positive JAWS for most banks

Aggregate operating expenses rose at a moderate pace of 4% YoY and all banks,

with the exception of Public Bank and AMMB, registered positive JAWS in 2Q16.

In fact, on a YoY basis, overheads contracted for CIMB (-2% YoY) and RHB (-4%),

aided in large part by the voluntary separation schemes introduced in 2015.

Operating expense growth (YoY chg)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 15% 16% 14% 8% 5% 8%

CIMB 6% 6% 5% -3% 0% -2%

Public Bk 7% 8% 14% 18% 12% 11%

AMMB 11% -9% 0% 3% 17% 10%

HL Bank 10% 1% 8% 5% 5% 5%

RHB 4% 6% 2% -3% -5% -4%

AFG 2% 11% 3% 12% 7% 1%

Average 9% 8% 8% 4% 4% 4%



Malaysia Banking

With positive JAWS, the industry’s cost/income ratio (CIR) moved down to 48.1%

in 2Q16 from 49.1% in 1Q16, and it was also down 0.7%-points YoY. While still up

6%-points YoY, AMMB’s CIR had in fact normalized after the hefty jump to 69% in

1Q16, largely on the back of resumed topline growth.

BAU cost as % of total income & YoY change

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15 (ppt)

Maybank 49.5% 46.9% 51.1% 48.6% 49.1% -0.4%

CIMB 55.4% 55.4% 53.9% 57.4% 53.6% -1.8%

Public Bk 31.2% 30.0% 31.3% 31.5% 33.1% 1.9%

AMMB 50.6% 53.7% 57.1% 68.9% 56.6% 6.0%

HL Bank 47.3% 45.2% 45.3% 47.1% 45.8% -1.5%

RHB 56.7% 56.8% 57.2% 48.5% 50.9% -4.5%

AFG 48.6% 45.4% 48.4% 51.2% 46.5% -2.1%

Average 48.8% 47.5% 49.4% 49.1% 48.1% -0.6%


Deterioration in asset quality

Cumulative absolute gross impaired loans (GIL) rose 18% YoY end-Jun 2016. This

was driven almost single-handedly by a 56% jump in Maybank’s GIL due to the

higher incidence of R&R loans, emanating from the O&G, shipping and steel-

related sectors. CIMB’s GIL ticked up 2% YoY due mainly to a rise in impaired

loans at its Thai operations. RHB saw lumpy corporate GILs in the property

development and steel related sectors while AFG’s GIL rose 20% YoY due to the

impairment of several SME loans.

Gross impaired loans (MYR’m)

2Q15 3Q15 4Q15 1Q16 2Q16 2Q16 vs

2Q15

Maybank 6,764 7,167 8,555 9,337 10,568 56%

CIMB 9,251 10,172 9,082 8,785 9,414 2%

Public Bk 1,393 1,418 1,352 1,335 1,383 -1%

AMMB 1,541 1,697 1,563 1,701 1,474 -4%

HL Bank 948 967 1,013 969 957 1%

RHB 2,960 2,907 2,841 2,729 3,117 5%

AFG 376 427 418 488 451 20%

Average 23,234 24,754 24,825 25,344 27,363 18%


The average GIL ratio for the seven banks rose 10bps QoQ to 1.91%. Of Maybank’s

2.34% GIL ratio end-June, NPLs comprised 1.32%, declining from 1.39% end-Mar

2016. Performing loans impaired also declined in contribution to 0.35% from

0.39% end-Mar 2016. Where there was a marked increase was in R&R loans, which

made up 0.67% of the 2.34% end-June, versus 0.33% end-Mar 2016.

Gross impaired loans ratios

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 1.56% 1.54% 1.86% 2.11% 2.34%

CIMB 3.31% 3.42% 3.05% 3.04% 3.16%

Public Bk 0.54% 0.53% 0.49% 0.48% 0.49%

AMMB 1.80% 1.95% 1.80% 1.94% 1.69%

HL Bank 0.84% 0.83% 0.86% 0.82% 0.79%

RHB 2.05% 1.94% 1.88% 1.82% 2.06%

AFG 1.01% 1.12% 1.08% 1.26% 1.17%

Average 1.72% 1.74% 1.74% 1.81% 1.91%



Malaysia Banking

Credit costs higher

Average credit costs were, as a consequence of the rise in GILs, higher at 46bps

in 2Q16 versus 41bps in 1Q16, but largely on account of Maybank and CIMB. On a

QoQ basis, Maybank’s credit cost jumped 11bps to 88bps from 77bps, while

CIMB’s credit cost climbed by 17bps to 80bps. AMMB and HL Bank benefit from

net recoveries during the quarter, this being the fourth consecutive quarter of

net recoveries for AMMB.

Credit charges

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 0.28% 0.60% 0.40% 0.77% 0.88%

CIMB 0.77% 0.73% 0.78% 0.63% 0.80%

Public Bk 0.10% 0.17% -0.15% 0.10% 0.10%

AMMB 0.05% -0.29% -0.33% -0.18% -0.17%

HL Bank 0.08% 0.08% 0.21% 0.07% -0.17%

RHB -0.11% 0.26% 0.62% 0.21% 0.16%

AFG 0.18% 0.20% 0.07% 0.06% 0.19%

Average 0.31% 0.40% 0.33% 0.41% 0.46%


Loan loss coverage below 100% for four banks

Average loan loss coverage (LLC) was relatively stable at 79%, but there remains

just two banks that have a LLC of more than 100% - Public Bank and HL Bank,

while RHB’s LLC continues to be the lowest among its peers at 59%.

Loan loss coverage without regulatory reserves

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 83% 85% 72% 70% 71%

CIMB 78% 77% 85% 85% 84%

Public Bk 129% 131% 121% 120% 116%

AMMB 103% 93% 95% 81% 81%

HL Bank 136% 131% 126% 127% 120%

RHB 56% 57% 63% 66% 59%

AFG 105% 93% 93% 77% 84%

Average 84% 83% 82% 80% 79%


Including regulatory reserves, average LLC is a more comfortable 126%, with

Public Bank, HL Bank and AFG sustaining ratios of above 100%. In this case,

Maybank’s coverage is the lowest at 74%.

Loan loss coverage including regulatory reserves

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 95% 99% 87% 76% 74%

CIMB 84% 84% 94% 95% 94%

Public Bk 242% 242% 255% 256% 250%

AMMB 103% 93% 95% 81% 81%

HL Bank 178% 178% 171% 178% 182%

RHB 74% 77% 84% 85% 79%

AFG 105% 93% 125% 109% 119%

Average 126% 123% 130% 126% 126%



Malaysia Banking

Banks continue to deleverage

From an average asset/equity ratio of 15x in 1Q09, banks have continued to

deleverage. Across the banks, leverage ratios continued to decline except for

Maybank and RHB.

Asset/equity ratios

2Q15 3Q15 4Q15 1Q16 2Q16

Maybank 11.7 11.8 11.5 11.3 11.4

CIMB 11.5 11.9 11.2 11.4 11.0

Public Bk 12.4 12.2 11.6 12.0 11.7

AMMB 8.9 9.0 9.1 8.8 8.4

HL Bank 11.0 10.5 9.2 9.2 9.0

RHB 11.1 11.2 10.0 9.6 10.7

AFG 11.6 11.5 11.6 11.5 11.1

Average 11.4 11.5 10.9 10.8 10.8


ROEs continue to miss targets

In FY15, the banks, with the exception of Public Bank, missed their ROE targets.

Against ROE targets that have been set for FY16, most banks are still short of

their targets for this year as well, with the exception of Public Bank and AFG.

CIMB has since revised its ROE target down to 9% from its original target of 10%.

RHB is likely to fall short of its 10% target if the Swiber impairment is taken into

consideration.

BAU ROE targets versus actual ROEs achieved

Original target Actual todate

Maybank FYE12/16 11-12% 8.9% ex-Swiber annualized

CIMB FYE12/16 10% 8.1% annualized

Public Bk FYE12/16 >15% 16.2% annualized

AMMB FYE3/17 9.5-10.5% 8.5% annualized

HL Bank FYE6/16 >11% 10.7% ex MSS reported

RHB FYE12/16 10% 10.5% ex Swiber annualized

AFG FYE3/17 =>11% 11.0% annualized



Malaysia Banking

Looking ahead…

Lowering our domestic loan growth forecast

Loan growth continued to head south, expanding just 5.1% YoY in Jul 2016 versus

5.6% in Jun 2016. Household (HH) loan growth broke below the 6% level to 5.7%

YoY in Jul 2016 from 6.0% YoY in June while non-HH loan growth was just 4.3%

YoY versus 5.0% YoY end-June.

On an annualized basis, total industry loans expanded just 2.6% as HH loans

expanded 4.3% but non-HH loans were flat with a growth of just 0.5%.

Total industry YoY loan growth (Apr 2007 – Jul 2016)

Source: BNM, Maybank KE

YoY household loan growth (Apr 2007 – Jul 2016)


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

(YoY chg)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

(YoY chg)


Malaysia Banking

YoY non-household & business loan growth (Jan 2011 – Jul 2016)


With the exception of Public Bank, actual YoY loan growth year todate for the

other banks has been lagging behind managements’ expectations, even more so

on an annualized basis.

Management’s loan growth targets vs actual YoY loan growth todate

Financial Mgt YoY growth

Year target end-Jun 2016

Maybank FYE12/16 8-9% 4.3%

CIMB FYE12/16 10% 6.5%

Public Bk (domestic) FYE12/16 8-9% 9.1%

AMMB FYE3/17 4-5% 1.6%

HL Bank FYE6/16 8-9% 6.3%

RHB FYE12/16 8% 4.8%

AFG FYE3/17 >5%, <10% 3.0%


For the seven banks, we now forecast slower overall (domestic and foreign) loan

growth of 5.3% in 2016 versus 6.5% previously and for it to stabilize at 5.4% in

2017 (from 6% before). Correspondingly, our industry (domestic) loan growth

forecast for 2016 is lowered to 5.3% from 6% previously and we estimate a similar

growth of 5.3% for 2017 versus 5.6% previously.

Gross loan growth estimates (annualised)

2013 2014 2015 2016F 2017F

Maybank 13.7% 13.3% 12.3% 3.9% 4.7%

CIMB 12.6% 12.8% 12.5% 6.3% 6.0%

Public Bk 11.8% 10.8% 11.6% 8.0% 6.9%

AMMB 6.2% 0.0% -0.4% 3.0% 3.2%

HL Bank 7.2% 8.0% 7.6% 5.9% 5.4%

RHB 9.2% 17.0% 6.2% 3.6% 4.3%

AFG 13.8% 14.5% 7.1% 6.0% 5.3%

Average 11.5% 11.7% 10.1% 5.3% 5.4%


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16

(YoY chg) Non-HH loan growth vs business loan growth

Non-HH Business


Malaysia Banking

Gross domestic loan growth estimates (annualised)

2013 2014 2015 2016F 2017F

Maybank 11.5% 8.8% 6.0% 3.0% 4.5%

CIMB 12.0% 8.1% 9.2% 7.4% 6.0%

Public Bk 12.0% 10.5% 10.3% 8.0% 6.9%

AMMB 6.2% 0.0% -0.4% 3.0% 3.2%

HL Bank 6.8% 7.6% 6.6% 5.2% 5.1%

RHB 5.1% 14.3% 4.4% 3.5% 4.2%

AFG 13.8% 14.5% 7.1% 6.0% 5.3%

Average 9.9% 9.0% 6.8% 5.3% 5.3%


NIM compression to be milder than expected

System deposits rose a marginal 1% YoY in Jul 2016, arresting the YoY contraction

that was witnessed over the past four preceding months. On a MoM basis, total

deposits contracted a marginal 1%. CASA expanded 1.2% YoY in July, having

contracted by 0.4% YoY in June.

Total deposit vs CASA growth (Sep 2010 – Jul 2016)


Taking a look at deposit growth by holder, business and government deposits

contracted 2.6% YoY and 7.3% YoY respectively, but financial institution deposits

rebounded 2.6% YoY after having contracted 9.6% YoY in June. Individual deposits

rose at a stable pace of 4.5% YoY.

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

YoY chg

Dep grwth Growth in CASA


Malaysia Banking

Business deposits vs Individual deposits growth (Oct 2010 – Jul 2016)


NIMs have generally held up better than expected due to (i) slower loan growth,

(ii) a more intense focus on risk-adjusted returns and thus higher yielding assets,

as well as (iii) the shedding of more expensive fixed deposits.

However, the recent 25bps cut in the OPR to 3.00% in Jul 2016 will have a short-

term negative impact on NIMs. Moreover, our Economics team does not rule out

the possibility of another rate cut by year end.

As the table below would indicate, banks in Malaysia have generally reacted to

the OPR cut by reducing their Base Rates by 10 to 25bps.

Base Rate changes

Base rates 3.2.16 17.5.16 10.6.16 15.6.16 8.8.16 Chg

Affin Bank 3.99 3.99 3.99 3.99 3.74 (0.25)

Alliance 3.97 3.97 3.97 3.97 3.82 (0.15)

AmBank 4.00 4.00 4.00 4.00 3.80 (0.20)

BOC 4.05 4.05 4.05 4.05 3.80 (0.25)

CIMB Bank 4.00 4.00 4.10 4.10 3.90 (0.20)

Citibank 3.90 3.90 3.90 3.90 3.65 (0.25)

HL Bank 3.84 3.94 3.94 3.94 3.69 (0.25)

HSBC 3.75 3.75 3.75 3.75 3.50 (0.25)

ICBC 4.02 4.02 4.02 4.02 3.92 (0.10)

Maybank 3.20 3.20 3.20 3.20 3.00 (0.20)

OCBC Bank 3.97 3.97 3.97 3.97 3.72 (0.25)

Public Bk 3.65 3.75 3.75 3.75 3.52 (0.23)

RHB Bank 3.90 3.90 3.90 3.90 3.65 (0.25)

StanChart 3.67 3.77 3.77 3.77 3.52 (0.25)

UOB 3.98 3.84 3.84 3.98 3.84 (0.14)

Source: BNM

-10%

-5%

0%

5%

10%

15%

20%

25%YoY chg, %

Business deposits Individual deposits


Malaysia Banking

Deposit rate competition eased post the OPR cut, but is beginning to creep back

in again. As such, we expect NIM pressure to resume in 2H16 and forecast an

average 6bps compression in NIM this year, before stabilizing in 2017.

NIM estimates (annualised)

2013 2014 2015 2016F 2017F

Maybank 2.43% 2.31% 2.31% 2.21% 2.20%

CIMB 2.85% 2.80% 2.66% 2.60% 2.56%

Public Bk 2.35% 2.24% 2.16% 2.08% 2.04%

AMMB 2.69% 2.49% 2.12% 2.01% 2.02%

HL Bank 2.11% 2.07% 2.00% 1.95% 1.98%

RHB 2.33% 2.29% 2.16% 2.12% 2.11%

AFG 2.24% 2.20% 2.16% 2.13% 2.11%

Average 2.43% 2.34% 2.22% 2.16% 2.15%


Cost saving efforts continue

CIMB estimates run-rate savings of about MYR300m per annum from its MSS while

the closure of its Australia office and the streamlining of its IB business are

expected to result in a further MYR200m worth of savings. RHB’s management

expects savings of about MYR193m per annum from its CTS exercise while HL

Bank’s management estimates MYR109m worth of cost savings per annum from its

MSS. Other forms of savings include the closure of branches while in the case of

RHB, it is shifting back to its own premises to save on rental.

That said, 2016 will see overheads impacted by higher salary cost adjustments

for unionized bank staff, as well as full-year GST adjustments for non-claimable

input costs. In the absence of these one-off cost adjustments, there is room for

operating expenses to stabilize further into 2017, and we expect a gradual

reduction in cost/income ratios to 47.3% in 2017 from 48.1% in 2016.

Cost/income ratios (annualised)

2013 2014 2015 2016F 2017F

Maybank 48.2% 49.2% 49.3% 48.9% 48.0%

CIMB 58.2% 59.1% 55.6% 57.9% 57.1%

Public Bk 30.7% 30.0% 30.9% 30.8% 31.2%

AMMB 46.3% 47.9% 55.2% 56.4% 54.4%

HL Bank 45.2% 44.7% 45.5% 45.5% 44.8%

RHB Cap 51.3% 54.7% 56.3% 49.8% 48.4%

AFG 46.4% 46.3% 47.9% 47.6% 46.9%

Average 46.6% 47.4% 48.7% 48.1% 47.3%



Malaysia Banking

Asset quality concerns persist

The industry’s gross impaired loans (GIL) ratio ticked up to 1.68% at end-Jul 2016

from 1.66% end-Jun 2016. The ratios were higher across most household loan

classes including working capital as well.

In absolute terms, GIL rose 9.5% YoY, led by a 3% YoY increase in residential GIL,

a 20% jump in commercial property GIL, a 32% YoY increase in personal lending

GIL and a 7.7% increase in credit card GIL. Working capital GIL rose 19% YoY.

YoY chg in absolute NPLs (Jan 2011 – Jul 2016)


For the banks in our coverage, we have factored in an uptick in NPL ratios over

the next two years. Household asset quality is likely to see some mild

deterioration amid higher living costs, and we are keeping a watchful eye on the

non-residential property loan book.

Apart from isolated cases, the SME sector still looks robust with little sign of

stress at this stage.

On the corporate front, signs of duress are emerging in the O&G sector and we

would not be surprised if several companies resorted to the restructuring of their

short-term loans, which would imply higher impaired loans for the banking

system. Property development is also another sector that we remain wary of, for

which there have been sporadic cases of default.

Conservatively, we have imputed rising GIL ratios over the next two years, amid

slower economic growth momentum in the current year (MKE’s GDP growth

forecast: +4.1% for 2016 vs. 2015’s +5.0%) and a marginal uptick in 2017 (MKE’s

+4.5%).

Gross impaired loans ratios (annualised)

2013 2014 2015 2016F 2017F

Maybank 1.48% 1.52% 1.86% NA NA

CIMB 3.15% 3.09% 3.05% 3.20% 3.25%

Public Bk 0.67% 0.61% 0.49% 0.50% 0.60%

AMMB 1.89% 1.81% 1.90% 1.97% 2.03%

HL Bank 1.29% 1.01% 0.81% 0.80% 0.83%

RHB 2.81% 2.03% 1.88% 2.15% 2.40%

AFG 1.54% 1.12% 1.20% 1.33% 1.39%

Average 1.82% 1.69% 1.75% 2.01% 2.17%


-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16

YoY change in NPLs


Malaysia Banking

Credit costs are expected to normalize higher and we have assumed a rising

trend in such costs into 2017. The exception is CIMB, where we expect credit

costs to decline in 2016, on the assumption that credit costs peaked in 2015 and

that asset quality in Indonesia stabilizes. In the case of AMMB, we expect ongoing

net recoveries into 2016.

Credit charge rates (annualised)

2013 2014 2015 2016F 2017F

Maybank 0.21% 0.10% 0.39% 0.65% 0.70%

CIMB 0.30% 0.61% 0.77% 0.64% 0.60%

Public Bk 0.17% 0.11% 0.06% 0.09% 0.11%

AMMB 0.22% 0.03% -0.15% -0.10% 0.01%

HL Bank 0.05% 0.00% 0.00% 0.07% 0.13%

RHB 0.38% 0.16% 0.23% 0.20% 0.23%

AFG -0.06% 0.07% 0.12% 0.18% 0.24%

Average 0.22% 0.20% 0.32% 0.37% 0.41%


Expecting a better 2H16

The table below shows our expectations of earnings in 2H16 versus the first half

and we are generally expecting 2H16 core net profit to be 11% higher HoH. In the

case of Maybank, consensus is expecting 2H16 earnings growth to be propelled by

the potential write-back of provisions made against R&R loans in 1H16. BNM

guidelines allow for the reclassification of such R&R loans from impaired loans

back to performing, if they are able to meet the revised loan payment terms over

six consecutive months.

As for CIMB, we expect earnings to improve 16% HoH, as credit costs start to

taper off and the operating environment continues to improve for its operations

in Thailand and Indonesia.

AMMB’s 20% HoH jump in earnings is expected to be driven by more stable NIMs

and lower operating costs, in the absence of lumpy cost items incurred in 1H16.

HoH change in 2016 core net profit

(MYR m) 1H16 2H16F 2016F HoH chg

Maybank 2,786 3,344 6,130 20%

CIMB 1,687 1,961 3,648 16%

Public 2,486 2,628 5,114 6%

AMMB 603 724 1,327 20%

HL Bank 1,056 1,133 2,190 7%

RHB Cap 1,107 1,011 2,118 -9%

AFG 262 268 530 2%

Core net profit 9,987 11,069 21,057 11%

Source: Maybank KE


Malaysia Banking

Core earnings growth forecasts broadly maintained

The table below shows our sector forecasts over the past four years and the

extent to which our earnings growth forecasts have been revised after each

results season, since 2013.

With the conclusion of the 2Q16 results season, 2016 cumulative operating profit

growth forecast for banks under our coverage are now lower at 4.0% from 5.0%,

while core net profit growth is unchanged at 2.1%. This compares against 0% core

earnings growth in 2015.

Correspondingly, cumulative operating profit growth in 2017 is now expected to

be higher at 6.6% from 6.0% previously while core net profit growth is estimated

to be marginally higher at 4.4% versus 4.0% previously.

Including the impairment provisions for bond exposure to Swiber in 2Q16,

cumulative headline net profit would be flat YoY in 2016 and up 6.4% in 2017.

Projected growth: MKE’s GDP forecasts vs MKE’s aggregate banks’ operating & net profit growth estimates (YoY chg)

2014 2015 2016 2017

(% YoY) GDP Op

profit Net

profit GDP Op

profit Net

profit GDP Op

profit Net

profit GDP Op

profit Net

profit

2Q16 6.0 0.2 -0.3 5.0 7.0 0.0 4.1 4.0 2.1 4.5 6.6 4.4

1Q16 6.0 0.2 -0.3 5.0 7.0 0.0 4.3 5.0 2.1 Na 6.0 4.0

4Q15 6.0 0.2 -0.3 5.0 7.0 0.0 4.3 5.5 5.3 Na 5.0 3.6

3Q15 6.0 0.2 -0.3 4.9 5.9 0.5 4.5 6.8 5.7

2Q15 6.0 0.2 -0.3 4.9 5.7 2.6 5.2 6.7 7.2

1Q15 6.0 0.2 -0.3 4.9 6.5 5.1 na 8.6 8.9

4Q14 6.0 0.2 -0.3 4.5 8.7 7.3 na 7.7 7.3

3Q14 5.9 0.9 1.9 5.2 10.5 8.0 na 7.7 7.0

2Q14 6.0 2.9 5.0 5.0 12.0 9.1

1Q14 5.4 6.1 7.6

4Q13 5.0 10.3 9.6

3Q13 5.0 10.4 9.8

2Q13 5.2 12.5 8.8

Source: Maybank KE


Malaysia Banking

Operating profit (annualised)

2014 2015 2016F 2017F 2018F 3-yr CAGR

Maybank 9,419 10,576 11,115 11,967 12,727

Growth -2.0% 12.3% 5.1% 7.7% 6.3% 6.4%

CIMB 5,727 6,831 6,650 7,127 7,590

Growth -3.2% 19.3% -2.7% 7.2% 6.5% 3.6%

Public Bk 6,067 6,524 6,750 7,077 7,493

Growth 7.3% 7.5% 3.5% 4.8% 5.9% 4.7%

AMMB 2,283 1,727 1,658 1,835 1,981

Growth -8.2% -24.3% -4.0% 10.7% 8.0% 4.7%

HL Bank 2,228 2,236 2,496 2,574 2,654

Growth 1.1% 0.4% 11.6% 3.1% 3.1% 5.9%

RHB Bank 2,824 2,707 3,142 3,350 3,557

Growth -2.6% -4.1% 16.1% 6.6% 6.2% 9.5% AFG 728 735 769 811 850 Growth 2.8% 0.9% 4.6% 5.5% 4.9% 5.0%

Total 29,276 31,335 32,580 34,740 36,853

Growth -0.7% 7.0% 4.0% 6.6% 6.1% 5.6%

Source: Companies, consensus estimates for Maybank, Maybank KE

Recurring net profit (annualised)

2014 2015 2016F 2017F 2018F 3-yr CAGR

Maybank 6,716 6,489 6,130 6,394 6,661

Growth 2.5% -3.4% -5.5% 4.3% 4.2% 0.9%

CIMB 3,159 3,411 3,648 3,876 4,088

Growth -24.6% 8.0% 6.9% 6.3% 5.5% 6.2%

Public Bk 4,519 4,955 5,114 5,322 5,585

Growth 11.2% 9.7% 3.2% 4.1% 4.9% 4.1%

AMMB 1,650 1,426 1,327 1,374 1,445

Growth -1.2% -13.6% -6.9% 3.5% 5.1% 0.4%

HL Bank 2,129 2,095 2,190 2,241 2,291

Growth 7.6% -1.6% 4.5% 2.4% 2.2% 3.0%

RHB Bank 1,926 1,722 2,118 2,230 2,336

Growth 5.2% -10.6% 23.0% 5.3% 4.8% 10.7% AFG 538 524 530 542 564 Growth -2.8% -2.5% 1.1% 2.2% 4.1% 2.5%

Total 20,637 20,623 21,057 21,979 22,970

Growth -1.0% -0.1% 2.1% 4.4% 4.5% 3.7%

Source: Companies, consensus estimates for Maybank, Maybank KE


Malaysia Banking

Sustaining ROEs is still a challenge

Meeting internal ROE targets for the year continues to be a challenge and it

would appear that most banks will likely fall short of their guidance for FY16/17.

Within our universe, the only banks that we think will achieve their ROE targets

for the year are Public Bank and Hong Leong Bank.

ROE guidance vs MKE forecasts (%)

Management’s target MKE forecast

Maybank FYE12/16 11-12% NA

CIMB FYE12/16 9% 8.6%

Public Bk FYE12/16 >15% 15.5%

AMMB FYE3/17 9.5-10.5% 8.5%

HL Bank FYE6/17 10-11% 10.0%

RHB Cap FYE12/16 10% 9.6%

AFG FYE3/17 =>11% 10.7%


With core earnings to grow just 2.1% this year and amid fairly moderate growth

into 2017, we expect average ROEs (ex-exceptionals) to slip to 10.4% in 2016 and

10.3% in 2017 from 11.4% in 2015. The only financial institution for which we see

a YoY expansion in ROEs would be RHB, arising from lower shareholders’ funds

post its corporate restructuring as well as stronger earnings growth following led

by cost savings.

Nevertheless, we still expect RHB’s ROE to trend below 10% into 2017 and this

applies to CIMB, AMMB and Maybank (according to consensus) as well.

ROAE forecasts (calendarized) – ex-exceptionals

2013 2014 2015 2016F 2017F

Maybank 14.9% 13.6% 11.9% 9.6% 9.9%

CIMB 15.5% 9.3% 8.7% 8.6% 8.6%

Public Bk 21.1% 18.7% 17.1% 15.5% 14.6%

AMMB 14.1% 14.0% 10.1% 8.5% 8.5%

HL Bank 15.1% 14.8% 12.2% 10.0% 10.0%

RHB Cap 11.5% 11.5% 8.3% 9.6% 9.8%

AFG 13.8% 12.6% 11.5% 10.8% 10.4%

Average 15.1% 13.5% 11.4% 10.4% 10.3%

Source: Companies, Consensus for Maybank, Maybank KE

# After stripping out exceptionals

ROAA forecasts (calendarized) – ex-exceptionals

2013 2014 2015 2016F 2017F

Maybank 1.2% 1.1% 1.0% 0.8% 0.8%

CIMB 1.3% 0.8% 0.7% 0.8% 0.8%

Public Bk 1.4% 1.4% 1.4% 1.4% 1.3%

AMMB 1.4% 1.4% 1.1% 1.0% 1.0%

HL Bank 1.2% 1.3% 1.1% 1.1% 1.1%

RHB Cap 1.0% 1.0% 0.7% 0.8% 0.9%

AFG 1.2% 1.1% 1.0% 0.9% 0.9%

Average 1.2% 1.2% 1.0% 1.0% 1.0%

Source: Companies, Consensus for Maybank, Maybank KE


Malaysia Banking

The positives of BIMB

BIMB, being the only listed Islamic banking group, is not included in our analysis

in this write-up, which focuses purely on the conventional banking groups.

Nevertheless, BIMB’s earnings performance in 2Q16 was better than expected.

Fundamentals for both 100%-owned Bank Islam and 59%-owned Syarikat Takaful

(STMB) remain strong and we maintain our BUY call with a SOP-TP of MYR4.70.

Bank Islam, which accounts for about 75% of group pretax profit, continues to

exhibit strong fundamentals with:

Financing growth trending above the industry average at 12% YoY;

Stable profit spreads which expanded a further 7bps to 2.77% in 2Q16,

largely on the back of an improved deposit mix and a higher financing to

deposit ratio of 88.5% end-June 2016.

Still strong asset quality. While its non-performing financing (NPF) took a hit

in 2Q16 due to an impairment in the O&G sector, its gross NPF ratio of 1.05%

end-Jun 2016 still compares very favourably to the industry average of 1.9%.

Comfortable buffers. Bank Islam’s financing loss coverage of 179% end-Jun

2016 compares very favourably against its conventional peer average of

79%.

Healthy capital ratios with a CET1 ratio of 12.7% end-Jun 2016 and a total

capital ratio of 15.9%


Malaysia Banking

Research Offices

REGIONAL

Sadiq CURRIMBHOY

Regional Head, Research & Economics

(65) 6231 5836 [email protected]

WONG Chew Hann, CA

Regional Head of Institutional Research


ONG Seng Yeow

Regional Head of Retail Research


TAN Sin Mui

Director of Research


ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Philippines

(63) 2 849 8836 [email protected]

Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682

[email protected]

STRATEGY

Sadiq CURRIMBHOY

Global Strategist


Willie CHAN

Hong Kong / Regional


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping

CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology

Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary

LIEW Wei Han

(603) 2297 8676 [email protected] • Consumer Staples

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Strategy • Oil & Gas - Regional

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Ning MA (852) 2268 0672 [email protected] • Insurance

Sonija LI, CFA, FRM (852) 2268 0641 [email protected] • Gaming

Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research


• Strategy • Oil & Gas • Automobile • Cement

Anubhav GUPTA


• Metal & Mining • Capital Goods • Property

Vishal MODI


• Banking & Financials

Abhijeet KUNDU


• Consumer

Neerav DALAL


• Software Technology • Telcos

SINGAPORE

Neel SINHA Head of Research (65) 6231 5838 [email protected] • Strategy • SMID Caps – Regional

Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

John CHEONG, CFA (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

Ng Li Hiang (65) 6231 5840 [email protected] • Banks

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement

Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property

Pandu ANUGRAH (62) 21 8066 8688 [email protected] • Infra • Construction • Transport• Telcos

Janni ASMAN (62) 21 8066 8687 [email protected] • Cigarette • Healthcare • Retail

Adhi TASMIN (62) 21 8066 8694 [email protected] • Plantations

Anthony LUKMAWIJAYA (62) 21 8066 8690 [email protected] • Aviation

PHILIPPINES

Michael BENGSON Head of Research (63) 2 849 8840 [email protected] • Strategy • Utilities • Conglomerates • Telcos Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Strategy • Consumer • Materials • Ind. Estates

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport

Yupapan POLPORNPRASERT (66) 2658 6300 ext 1394 [email protected] • Oil & Gas

Tanawat RUENBANTERNG (66) 2658 6300 ext 1395 [email protected] • Banks & Diversified Financials

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas

NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas


Malaysia Banking

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through Maybank Kim Eng Securities USA Inc. This report is not directed at you if it is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.


Malaysia Banking

Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 5 September 2016, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 5 September 2016, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.


Malaysia Banking

Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

PNB House

77 Queen Victoria Street

London EC4V 4AY, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Sentral Senayan III, 22nd Floor

Jl. Asia Afrika No. 8

Gelora Bung Karno, Senayan

Jakarta 10270, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International,

16, Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6336-5157

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

New York Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam Tien Nguyen [email protected]

Tel: (84) 44 555 888 x8079

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

[Unchanged] Some hits and misses · RHB Bank HOLD 4.93 20,692 5.30 10.1 9.7 1.0 0.9 9.8 9.6 3.0 3.1...

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Transcript of [Unchanged] Some hits and misses · RHB Bank HOLD 4.93 20,692 5.30 10.1 9.7 1.0 0.9 9.8 9.6 3.0 3.1...