Will Maybank follow suit to raise its base rates?
KUALA LUMPUR: Deutsche Bank AG Equities Research has lowered its outlook for Malayan Banking (Maybank) and CIMB but upgrades Public Bank after MSCI's rebalancing.
It said on Thursday it had downgraded Maybank from Buy to Sell and cut the target price by 25% to RM7.40 as revenue weakness hurts its returns on equity (ROE) prospects.
“Maybank and CIMB will be additionally impacted as offshore funds sell out of Malaysia on reduced MSCI Emerging Markets (EM) weighting (-33 basis points).
“We upgrade Public Bank from Hold to Buy, lifting the target price to RM22, to account of its having the strongest domestic retail banking pedigree.
“We rereiterate our cautious sector view, singling out AMMB's new strategic plan as an important event to watch this quarter,” said the Hong Kong based research house
Deutsche Bank said the MSCI semi-annual rebalancing, which comes into effect on June 1, would negatively impact Maybank and CIMB.
It said an oil price rally, political stabiity and a consumption-driven upside surprise to the gross domestic product (GDP) partly expalins the strong offshore hoildings in bond and equity markets till April.
“However, with MSCI reducing Malaysia's weightage in the EM index by 33 basis points (effective June 1), funds will sell out of their positions, affecting Maybank (-10 basis points) and CIMB (-7 basis points) the most.
The research house said on weak earnings momentum, it downgraded Maybank from Buy to Sell on a target price of RM7.40, which is a reduction of 25%, while also cutting CIMB's target price by 4% to RM4.40.
As for Public Bank, it said the inclusion in the list was justified as it has the strongest retail banking franchise in Malaysia and better return on equity.
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