KUALA LUMPUR: Affin Hwang Capital Research has an Overweight rating on the banking sector and believes Hong Leong Bank has the potential to outperform with an upside potential of 8.8% based on its target price of RM18.50.
Earnings drivers such as likely stronger earnings from Bank of Chengdu, a digital transformation and potentially a special dividend could continue to excite investors, it said.
Its other top pick is Maybank, which it said remains an agressive player in the banking and capital markets.
The research firm gives it a Buy rating with a target price of RM10.50.
"We are upbeat on its digitisation initiatives while expecting stable fund-based income generation and a steady NIM," it said.
Meanwhile, Affin Hwang Research recommends investors take money off the table from CIMB Group
and RHB Bank as both are trading near its price targets.
"Our concerns on CIMB Group centre on a potentially weaker NIM and elevated provisions (lack of credit recoveries) while for RHB, its weaker asset quality and the need to raise its loan loss cover to 100% (Sept17: at 93.6%) could indicate potential downside risk on credit cost."
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