Six KLCI bank stocks trade at YTD discount as OPR holds for second year

New Straits Times

09-05-2025

KUALA LUMPUR: Six out of seven banking components of the FTSE Bursa Malaysia KLCI continued to trade at a year-to-date (YTD) discount as the Monetary Policy Committee (MPC) wrapped up its third meeting of the year.
Leading the pack is CIMB Group Holdings Bhd, currently trading at RM6.87 a share, 15.5 per cent below its opening price of RM8.13 at the start of the year.
The bank has a consensus target price of RM8.51, representing an upside potential of 23.11 per cent, according to Bursa Marketplace.
CIMB, Malaysia's second-largest lender with a market capitalisation of RM74.7 billion, is covered by at least 18 research houses with target prices ranging from RM7.60 to RM9.68.
The stock has traded between RM6.21 and RM8.50 over the past 52 weeks.
Trailing behind is Hong Leong Financial Group Bhd (HLFG), whose shares closed at RM16.70, down 7.94 per cent from RM18.14 at the start of the year.
HLFG has a consensus target price of RM23.15, reflecting an upside potential of 39.29 per cent. It is rated by at least four research houses, with price targets between RM21.40 and RM24.70.
The stock's 52-week range spans from RM15.70 to RM20.18. At RM16.72 per share, the group has a market capitalisation of RM19.11 billion.
HLFG is controlled by the Quek family through Hong Leong Group, which operates in both Malaysia and Singapore.
The company serves as the umbrella for Hong Leong Bank Bhd, Hong Leong Capital Bhd and non-listed HLA Holdings Bhd.
Its sister company, Hong Leong Bank, is also trading at a YTD discount, albeit marginally.
The bank's share price has slipped 2.35 per cent to RM19.94 from RM20.42 on Jan 2, valuing the group at RM43.05 billion.
However, unlike HLFG and CIMB, Hong Leong Bank climbed past its Jan 2 price, hitting a YTD high of RM21.40 on Feb 28.
At least 16 research firms cover Hong Leong Bank, with target prices ranging between RM21.40 and RM31.40.
The consensus target stands at RM24.69, implying an upside potential of 24.35 per cent.
The remaining discounted counters are Malayan Banking Bhd, down 2.95 per cent, Public Bank Bhd, down 1.98 per cent, and AMMB Holdings Bhd, down 3.28 per cent.
RHB Bank Bhd stands out as the sole gainer, rising 3.41 per cent YTD to RM6.67, driven in part by record earnings and dividends in 2024.
The stock has a consensus target price of RM7.42, offering a potential upside of 10.26 per cent.
It has traded between RM5.47 and RM7.04 over the past 12 months, with a current market capitalisation of RM29.34 billion.
Yesterday, Bank Negara Malaysia held the overnight policy rate (OPR) steady at three per cent during its MPC, marking exactly two years since the rate was last adjusted.
The central bank has maintained the OPR at this level since May 2023, following a cumulative 125 basis-point hike from the pandemic-era low of 1.75 per cent.
The MPC is scheduled to meet next in July, September and November.
In a recent note, Hong Leong Investment Bank Bhd said the banking sector may face margin compression if Bank Negara opts to cut the OPR in response to rising global tariff tensions.
However, it said the impact on banks would be more manageable compared to past rate cuts, as lenders are expected to take pre-emptive measures such as shortening fixed deposit (FD) tenures.
"This move allows for faster repricing at lower cost, while moderating FD growth to avoid overexposure ahead of any rate adjustments," it said.
HLIB has maintained an 'Overweight' call on the sector.
CIMB Securities Research, which holds a 'neutral' view on the banking sector, has issued 'buy' calls on Alliance Bank Malaysia Bhd, Public Bank and RHB Bank, mainly for their dividend appeal.
"We expect banks' share prices to trade rangebound in the next few months until there is greater clarity on the external reciprocal tariff situation," it said.