PETALING JAYA: There is still upside in banking stocks despite the rise in their share prices over the past two months, according to AmInvestment Bank Research.
The research house, which has maintained an “overweight” call on the stocks, said investors should remain selective.
AmInvestment Bank Research advocated greater selectivity based on defensiveness, capital management scope and capacity for incremental foreign buying.
It noted that Hong Leong Financial Group Bhd
(HLFG), Hong Leong Bank Bhd (HLB) and Public Bank Bhd fit the selectivity profile.
“Separately, CIMB Group Holdings Bhd continues to be attractive as the cheapest large-cap bank, with further capital management upside,” it said.
All four banks come with “buy” recommendations.
It has revised HLFG’s target price (TP) to RM33 from RM31.20 while HLB’s TP has been revised to RM28 from RM25.80.
Public Bank’s TP has been revised to RM5.60 from RM5.10 and CIMB’s TP to RM10.30 from RM9.20.
Foreign flows into the stock market continued to be supportive, with net buying rebounding by RM1.4bil from RM5.9bil outflow in the fourth quarter of 2025.
“Seeing foreigners only just returning after a sizeable RM22bil outflow in 2025, there is potential for sustained accumulation,” it said.
Domestic banks’ current foreign shareholding levels of 22% versus the 10-year peak of 26% remains supportive of foreign investor accumulation.
Despite a 10% rise in their share prices, banking stocks still have upside from incremental buying among local and foreign investors while their valuations remain inexpensive as they trade at only one time price-to-book (P/B) and 10 times price-to-earnings (P/E) compared with a fairer 12 to 13 times.
“Relative to Singaporean counterparts, Malaysian banks are also attractively priced despite comparable yields (of around 5%) with consensus yet to bake in higher dividend payout ratio (DPR) from capital management (sensitivity shows every five-percentage point rise in DPR could lift sector yields by 40 to 50 basis points,” it said.
It added that the capital management theme “is fairly nascent” and investors and investors have yet to enjoy the potential dividend upside, which suggests that share price can still rise in 2026 and beyond.
“Accordingly, we revisit the valuation of banks under our coverage and now peg them to higher P/B multiples of 0.6 times to 1.6 times, cross-checked against implied valuations of 10 times to 14 times P/E and 3% to 6% dividend yield, while also benchmarking to Singaporean peers for calibration,” it said.
