malaysia industry focus malaysian banks...rhbc 4qfy15 below below yes ( ) 7.007.10 hlfg 2qfy16...

ed-CK / sa- BC

Not a pretty sight

• Weak Weak Weak Weak 2015 2015 2015 2015 earnings tractionearnings tractionearnings tractionearnings traction,,,, as eas eas eas expected xpected xpected xpected

• 2016 will be a challenging year2016 will be a challenging year2016 will be a challenging year2016 will be a challenging year

• Outstanding concerns remain on asset quality and capitalOutstanding concerns remain on asset quality and capitalOutstanding concerns remain on asset quality and capitalOutstanding concerns remain on asset quality and capital

• Only two banks on our Only two banks on our Only two banks on our Only two banks on our top top top top buy list buy list buy list buy list –––– PBK and HLBPBK and HLBPBK and HLBPBK and HLB

Weak FY15 as expected, except for PBK. 4Q15 earnings

traction was weak as expected, dented mainly by provisions. Expenses were also higher compared to a year ago, with one-offs

being booked by HLB (MSS) and AMMB (regulatory penalty). Revenues were sluggish q-o-q but largely aided by loan growth,

thanks to currency translation. NIM fell as expected. Overall earnings contracted by 1% q-o-q and were flat y-o-y. PBK’s

earnings stood out the most, defying the headwinds by reporting above average loan growth, improved delinquency trends and

best-in-class cost-to-income ratio. On a full-year basis, CY15 earnings contracted by 3.7% y-o-y. Excluding one-offs (wherever

identifiable), its core FY15 earnings were flat y-o-y.

No general improvement in trends after a hard year. Banks are all guiding for slower targets and softer growth in 2016,

which is not surprising. We had, in our 2016 outlook report dated 10 Dec 2015, stated that we do not expect general improvements

in industry trends despite seeing banks trading at trough valuations. Post-results, we have slashed our FY16 earnings

forecasts by 7% on sustained high credit costs (save for CIMB and RHBC for their kitchen sinking activities in 2015) and slower loan

growth. We expect 2016 loan growth at 6-7% (2015: 8%). NIM will remain under pressure, as deposit competition continues to be

stiff. Capital markets remain challenging. Costs should be lower in 2016 with one-off costs relating to staff rationalisation taken care

of. But we would not discount further cost control measures in a tough environment like this.

Outstanding concerns on asset quality and capital. Banks have largely accelerated provisions in 2015 but concerns still linger

on how asset quality will pan out this year. Exposure to the oil & gas sector is less than 5% of total loans, based on what the banks

have disclosed during the recent analyst briefings. We believe that if all these exposures turn sour, which is highly unlikely, only PBK,

HLB and AFG will be the least affected. Nevertheless, we remain cautious on asset quality. We expect credit costs to remain high at

35bps bps (2015: 34bps). Separately, CIMB and AMMB’s CET1 (fully loaded) ratios are still among the lowest. Recalibration of

risk-weighted assets seems to be the route taken to address this issue for now. But we believe the market, to some extent, is

pricing in capital-raising risks to its valuations.

Only two banks on our top BUY list: PBK and HLB. After laying down all our cards, there appears to only be two banks we

favour. We continue to like PBK for its resilience and ability to defy headwinds. We believe PBK will continue to do well in 2016. For

HLB, while its ROE will come off because of its rights issue and weakness from its associate, its strong liquidity and asset quality

position remain its key plus points.

KLCIKLCIKLCIKLCI :::: 1,654.751,654.751,654.751,654.75

Analyst LIM Sue Lin +65 8332 6843 Lynette CHENG +603 2604 3907 [email protected] [email protected]

STOCKS

Source: DBS Bank, AllianceDBS Research

Malaysian Banks: Summary of results F inanc ialF inanc ialF inanc ialF inanc ial EPSEPSEPSEPS v s ourv s ourv s ourv s our v s consensusv s consensusv s consensusv s consensus

BankBankBankBank quartersquartersquartersquarters ChangeChangeChangeChange est imatesest imatesest imatesest imates est imatesest imatesest imatesest imates

RMRMRMRM RMRMRMRM

Affin 4QFY15 ▼ Inline Below Yes (▼) ▼ 2.00 1.80

AFG 3QFY16 NANANANA NA Inline N/A ◄► NA NA

AMMB 3QFY16 ▼ Below Below Yes (▼) ▼ 4.80 4.60

CIMB 4QFY15 ▼ Inline Below Yes (▼) ▼ 4.80 4.60

HLB 2QFY16 ◄► Below Below Yes (▼) ▼ 14.80 14.70

MAY 4QFY15 ◄► Inline Inline Yes (▼) ▼ 9.00 8.90

PBK 4QFY15 ◄► Inline Above No ◄► 21.95 21.95

RHBC 4QFY15 ◄► Below Below Yes (▼) ▼ 7.10 7.00

HLFG 2QFY16 ◄► Inline Inline Yes (▼) ▼ 16.80 16.70

BIMB 4QFY15 ◄► Inline Inline No ◄► 3.85 3.85

TP T P T P T P

ChangeChangeChangeChange

Prev ious Prev ious Prev ious Prev ious

T PTPTPTP

Rev ised Rev ised Rev ised Rev ised

T PTPTPTP

Earnings Earnings Earnings Earnings

rev isionrev isionrev isionrev ision

Source: Companies, DBS Bank, AllianceDBS

Malaysian Banks: Sector valuation

Mean, 1.62

+1SD, 1.86

+2SD, 2.09

-1SD, 1.39

-2SD, 1.16

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

05 06 07 08 09 10 11 12 13 14 15 16

PBV (X)PBV (X)PBV (X)PBV (X)


DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity

1 Mar 2016

Malaysia Industry Focus

Malaysian Banks

Refer to important disclosures at the end of this report

Price Price Price Price Mkt CapMkt CapMkt CapMkt Cap Target Target Target Target PricePricePricePrice

Performance (%)Performance (%)Performance (%)Performance (%)

RMRMRMRM US$mUS$mUS$mUS$m RMRMRMRM 3 mth3 mth3 mth3 mth 12 mth12 mth12 mth12 mth RatingRatingRatingRating

Affin Holdings Berhad 2.15 990 1.80 (11.2) (26.9) FULLY

VALUED Alliance Financial Group 3.65 1,319 NA 1.4 (24.5) NR AMMB Holdings 4.33 3,094 4.60 (3.0) (29.3) HOLD CIMB Group Holdings 4.52 9,136 4.60 (1.8) (24.2) HOLD Hong Leong Bank 13.14 6,392 14.70 (1.8) (4.9) BUY Maybank 8.51 19,691 8.90 1.1 (5.4) HOLD Public Bank 18.48 16,914 21.95 1.1 0.9 BUY RHB Capital 5.30 3,863 7.00 (3.8) (30.1) BUY BIMB Holdings Berhad 3.60 1,356 3.85 (11.1) (12.0) HOLD Hong Leong Financial Group 13.98 3,795 16.70 3.7 (14.4) BUY

Industry Focus

Malaysian Banks

Malaysian Banks: Key changes post-4Q15 results BankBankBankBank F inancialF inancialF inancialF inancial EPSEPSEPSEPS v s ourv s ourv s ourv s our v s consensusv s consensusv s consensusv s consensus

quartersquartersquartersquarters ChangeChangeChangeChange est imatesest imatesest imatesest imates est imatesest imatesest imatesest imates

RMRMRMRM RMRMRMRM

Affin 4QFY15 ▼ Inline Below Yes (▼) FY16-17F earnings revised down on

higher credit cost assumption

◄► Fully ValuedFully Valued ▼ 2.00 1.80

AFG 3QFY16 NANANANA NA Inline N/A NANANANA NR NR NANANANA NA NA

AMMB 3QFY16 ▼ Below Below Yes (▼) FY16-18F earnings revised down mainly

on higher NIM compression and lower

loan growth

◄► Hold Hold ▼ 4.80 4.60

CIMB 4QFY15 ▼ Inline Below Yes (▼) FY16-17F earnings revised down on


◄► Hold Hold ▼ 4.80 4.60

HLB 2QFY16 ◄► Below Below Yes (▼) FY16-18F earnings revised down on

higher credit cost and associate income.

◄► Buy Buy ▼ 14.80 14.70

MAY 4QFY15 ◄► Inline Inline Yes (▼) FY16-17F earnings revised down on


◄► Hold Hold ▼ 9.00 8.90

PBK 4QFY15 ◄► Inline Above No ◄► Buy Buy ◄► 21.95 21.95

RHBC 4QFY15 ◄► Below Below Yes (▼) FY16-17F earnings revised down on


◄► Buy Buy ▼ 7.10 7.00

HLFG 2QFY16 ◄► Inline Inline Yes (▼) Earnings trimmed inline with HLB ◄► Buy Buy ▼ 16.80 16.70

BIMB 4QFY15 ◄► Inline Inline No ◄► Hold Hold ◄► 3.85 3.85


T PT PTPTP

Call Call Call Call



CallCallCallCall


CallCallCallCall

T P T P T P T P



TPTPTPTP

Reasons for earnings v ariat ion and Reasons for earnings v ariat ion and Reasons for earnings v ariat ion and Reasons for earnings v ariat ion and

comment on earnings rev isioncomment on earnings rev isioncomment on earnings rev isioncomment on earnings rev ision

Earnings Earnings Earnings Earnings

rev isionrev isionrev isionrev ision


Missing expectations

Only Only Only Only twotwotwotwo out of the out of the out of the out of the eighteighteighteight major banks reportmajor banks reportmajor banks reportmajor banks reported earnings ed earnings ed earnings ed earnings

within consensus expectations; within consensus expectations; within consensus expectations; within consensus expectations; PBK above expectation; PBK above expectation; PBK above expectation; PBK above expectation; the the the the

rest disappointed.rest disappointed.rest disappointed.rest disappointed. The key disappointment was the higher-

than-expected provisions. Sporadically, there were also

disappointments due to higher- than-expected NIM

compression (AMMB) and lower-than- expected non-interest

income (RHB). While MAY’s results were in line with

expectations, disappointing trends were noted as loan loss

coverage and dividend trended lower.

How will 2016 fair.How will 2016 fair.How will 2016 fair.How will 2016 fair. During the quarter, most banks revealed

their targets for 2016 which noticeably paint a softer year in

2016. Loan growth targets were lowered by 1-2% while ROE

was guided to be flat to -2%. The banks guided for higher to

similar credit costs from FY15 to FY16. Positively, NIM

compression was largely guided to be less severe. This is with

the exception of AMMB which continues to face intense NIM

squeeze, as a result of both its portfolio rebalancing initiatives

(shifting to better quality loans with lower yields) and deposit

competition (causing pressure on funding cost).

Earnings cut by 7% postEarnings cut by 7% postEarnings cut by 7% postEarnings cut by 7% post----results; will this be the last quarter results; will this be the last quarter results; will this be the last quarter results; will this be the last quarter

for downgrades?for downgrades?for downgrades?for downgrades? Our FY16F earnings were largely slashed to

account for higher credit costs and slower loan growth. With

our ROE forecasts largely in line or lower than guided (with

the exception of PBK), we are hopeful for an end to the

earnings downgrade cycle for the banks. Note that consensus

numbers were cut by 2-18% in the past six months and even

more so in the past year. Nevertheless, negative surprises on

asset quality could still pose downside risks to earnings. Our

2016 earnings growth is now at 8% (4% excluding one-offs)

vs 14% previously.

Malaysian Banks: Consensus earnings cut over the last six months

Pre vs Post resultsPre vs Post resultsPre vs Post resultsPre vs Post results 1Mth1Mth1Mth1Mth 2Mth2Mth2Mth2Mth 3Mth3Mth3Mth3Mth 6Mth6Mth6Mth6Mth

AMMB Holdings (3.57) (2.87) (2.89) (3.93) (9.09)

Affin Holdings (12.67) (10.98) (10.40) (10.40) (17.55)

Alliance Financial Group 0.09 (0.53) (0.45) (0.40) (3.25)

CIMB (2.53) (0.79) (0.30) (2.20) (10.51)

Hong Leong Bank (2.83) (2.67) (3.70) (3.91) (7.03)

Maybank 0.72 (1.52) (3.66) (4.07) (6.57)

Public Bank - (0.07) 0.50 0.33 (2.20)

RHB Capital (5.40) (2.80) (2.36) (2.69) (6.97)

Source: Bloomberg L.P Finance, DBS Bank, AllianceDBS

Industry Focus

Malaysian Banks

Malaysian banks: Missing FY15 targets; 2016 targets are modest but some are challenging

LoLoLoLoan growthan growthan growthan growth NIMNIMNIMNIM CostCostCostCost----totototo----incomeincomeincomeincome Credit chargeCredit chargeCredit chargeCredit charge ROEROEROEROE

AffinAffinAffinAffin

FY15 (T)FY15 (T)FY15 (T)FY15 (T) N/A N/A N/A N/A 8%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) N/A N/A N/A N/A 4.6%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) N/A N/A N/A N/A 4.8%

AMMBAMMBAMMBAMMB

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 3% -15bps ≤45% 15bps 14 %

FY15 (A)FY15 (A)FY15 (A)FY15 (A) -1.60% -34bps 45.7% -3bps 13.9%

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 4-5% -15 to -20bps ≤46% 20bps 12-12.5%

FY16 (R)FY16 (R)FY16 (R)FY16 (R) -1% >37bps ≤58% N/A c.9%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) -1% -40bps 56% -9bps 9%

CIMBCIMBCIMBCIMB

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 10% Stable <55% 40-50bps 11%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) 12.5% (6.6% ex currency effect)

-8bps 60.1% (55.6% BAU)

78bps 6.0% (8.6% BAU)

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 10% -5 to -10bps <53% 60-70bps 10%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) 10% -5bps 57% 71bps 8.6%

HLBHLBHLBHLB

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 9% <2% <44% 25-35bps >14%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) 8.9% -3bps 44.6% -5bps 14.3%

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 8-9% -5bps 42-44% 25-35bps 11%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) 7% -2bps 43.8% 13bps 11%

MAYMAYMAYMAY

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 9-10% -8 to -10bps N/A 30bps 13-14%

FY15 (R)FY15 (R)FY15 (R)FY15 (R) 8-9% -8 to -10bps N/A 30bps 12-13%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) 12% (5.7% ex currency effect)

+8bps 48.4% 44bps 11.9%

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 8-9% Stable w downside risk

N/A 40-50bps 11-12%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) 8% -6bps 48.4% 44bps 10.8%

PBKPBKPBKPBK

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 9-10% -8 to 10bps <32% 20bps >16%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) 11.6% -4bps 30.5% 5bps 17.1%

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 8-9% -8bps <33% 20bps >15%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) 9% -4bps 30.10% 6bps 16.5%

RHBCRHBCRHBCRHBC

FY15 (T)FY15 (T)FY15 (T)FY15 (T) 10% N/A <51% N/A >11.5%

FY15 (R)FY15 (R)FY15 (R)FY15 (R) 6-7% -5bps <51% N/A 10-11%

FY15 (A)FY15 (A)FY15 (A)FY15 (A) 6% -10bps 61.3% (56.3% without CTS)

22bps 7.2% (8.4% without CTS)

FY16 (T)FY16 (T)FY16 (T)FY16 (T) 8% <2% <53% 30-40bps 10%

FY16 (F)FY16 (F)FY16 (F)FY16 (F) 8% -1bps 54% 26bps 8.2%

Note: T: Target; R: Revised, F: DBS Forecast ^ AMMB’s refer to FY Mar; HLB’s refer to FY June


Industry Focus

Malaysian Banks

2016 outlook - reiterated

Little excitement despite 8% earnings growth in 2016.Little excitement despite 8% earnings growth in 2016.Little excitement despite 8% earnings growth in 2016.Little excitement despite 8% earnings growth in 2016. No

fundamental improvements are expected to be seen for the

Malaysian banks in 2016. Earnings growth of 8% will largely

be driven by lower expenses (due to staff rationalisation

expenses in 2015). As a result of two consecutive years of

earnings contraction in the sector, 2016 is expected to grow

by a seemingly high 8%. On a normalised basis, earnings are

expected to grow by 4% in 2016F, mainly supported by lower

NIM compression y-o-y. Note that 2015 was a year where

there were several one-off items making a dent on earnings, in

particular, CIMB, RHBC and HLB’s staff rationalisation

expenses.

Malaysian Banks: Inflated earnings growth in 2016

17.0 17.0 17.0 17.0

8.2 8.2 8.2 8.2

(1.6)(1.6)(1.6)(1.6) (3.7)(3.7)(3.7)(3.7)

8.3 8.3 8.3 8.3

-40

-30

-20

-10

0

10

20

30

40

CY12 CY13 CY14 CY15 CY16F

%%%%

AMMB AFFIN CIMB HLB MAY

PBK RHBC AFG Sector

* No forecasts for AFG


Malaysian Banks: Normalised earnings growth

17%17%17%17%

8%8%8%8%

----2%2%2%2% 0%0%0%0%

4%4%4%4%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%



PBK RHBC AFG Sector

* CY15 exceptional items include CIMB (RM652m costs), RHBC (RM309m costs), AMMB (RM216m net gain); No forecasts for AFG


Diving into 2016 P/L indicDiving into 2016 P/L indicDiving into 2016 P/L indicDiving into 2016 P/L indicates revenues will be weak.ates revenues will be weak.ates revenues will be weak.ates revenues will be weak. Revenue

in 2016F is expected to grow by 6%, slightly lower than 2015.

We expect PBK to record strong revenue growth, supported by

its solid portfolio which focuses on mass-market loan growth

and non-market related income. Meanwhile, AMMB’s revenue

contraction is attributable to weak net interest income traction,

as the bank continues to rebalance its loan portfolio to focus

on better quality loans.

Malaysian Banks: Revenue growth trends

14.514.514.514.5

8.48.48.48.4

2.02.02.02.0

7.77.77.77.75.65.65.65.6

(15)

(10)

(5)

-

5

10

15

20

25

30


%%%%


PBK RHBC AFG Sector



NIM compression will remain a feature.NIM compression will remain a feature.NIM compression will remain a feature.NIM compression will remain a feature. We expect NIM

compression to be less severe in 2016F (-6bps vs -9bps in

2015). Higher funding costs are expected to pressure NIM

more so than loan yields. Competition for loans has largely

stayed muted. Loan-yield compression across banks are a

function of several factors including replacement of lower-

yielding mortgages and portfolio shift to better quality loans

which tend to attract lower pricing.

Malaysian Banks: Net interest margins

2.46% 2.38%2.25%

2.16% 2.10%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%



PBK RHBC AFG Sector



Industry Focus

Malaysian Banks

Deposit competition still plaguing funding cost.Deposit competition still plaguing funding cost.Deposit competition still plaguing funding cost.Deposit competition still plaguing funding cost. Competition

remains rife for a shrinking pool of core deposits, as core

deposits continue to contract y-o-y. The proportion of CASA to

total deposits now hovers around 26%. Notably, “other

deposits” have been largely driven by foreign currency deposits

amid the weak RM.

Malaysian Banks: Deposit growth

-20%

-10%

0%

10%

20%

30%

40%

Jan-08

May-08

Sep-0

8

Jan-09

May-09

Sep-0

9

Jan-10

May-10

Sep-1

0

Jan-11

May-11

Sep-1

1

Jan-12

May-12

Sep-1

2

Jan-13

May-13

Sep-1

3

Jan-14

May-14

Sep-1

4

Jan-15

May-15

Sep-1

5

CASA Fixed deposits Others Total (ex-others) Total

y-o-y growth (%) Dec-15Total deposit growth = 1.8% y-o-yCore deposit growth = -6.4% y-o-yCASA growth = 1.6% y-o-yOther dep growth = 16.5% y-o-y

Source: BNM, DBS Bank, AllianceDBS

Malaysian Banks: CASA to total deposits

23.0%

23.5%

24.0%

24.5%

25.0%

25.5%

26.0%

26.5%

27.0%

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Fixed deposits Demand deposits

Saving deposits CASA to total deposits

CASA to total deposits (%)Deposits (RM bn)


Business loan approvals have moderated; spelling a bleaker Business loan approvals have moderated; spelling a bleaker Business loan approvals have moderated; spelling a bleaker Business loan approvals have moderated; spelling a bleaker

outlook outlook outlook outlook forforforfor loan growth in 2016.loan growth in 2016.loan growth in 2016.loan growth in 2016. Business loans growth has

supported system loan growth since overtaking retail loan

growth in May 2015. Leading indicators are insufficiently

compelling to warrant continued growth in business loans, as

approval trends have been volatile. Retail loan growth remains

a drag but PBK and HLB may still see strong mortgage growth

from their pipelines built up in the previous quarters. We

expect 2016 system loan growth to range between 6% and

7%.

Malaysian Banks: Loan growth breakdown

-8%

-4%

0%

4%

8%

12%

16%

20%

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Total loan growth Retail loan growth Business loan growth

Dec-15:Total loan growth: 7.9% y-o-yRetail loan growth: 7.4% y-o-yBusiness loan growth: 8.5% y-o-y


Malaysian Banks: Loan approval trends

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Retail loan 6 mth M.A Business loan 6 mth M.A Total loan 6 mth M.A


Malaysian Banks: Loan growth

5.37%

3.86%

4.59%

4.77%

8.50%

8.56%

6.25%

8.56%

12.86%

7.82%

12.79%

13.57%

10.41%

10.62%

9.31%

7.87%

6.50%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

Gross loans (RM bn) Loan growth yoy


Industry Focus

Malaysian Banks

Lower costs in 2016. Lower costs in 2016. Lower costs in 2016. Lower costs in 2016. Lower expenses is one of the key drivers to

earnings growth for the banks in 2016. This stems from large

one-off costs related to its business and staff rationalisation

exercises, particularly for CIMB, RHBC and HLB. Stripping out

these along with AMMB and MAY’s one-off gains in 1QCY15

and 3QCY15, respectively, the cost-to-income ratio in 2015

would be at a normalised level of 49.7%, which otherwise would

have risen to 50.9%. We expect the 2016F cost-to-income ratio

to be flattish relative to 2015, barring other one-off costs.

Malaysian Banks: Cost-to-income ratio trend

44.9%44.9%44.9%44.9%45.6%45.6%45.6%45.6%

46.6%46.6%46.6%46.6%47.2%47.2%47.2%47.2%

48.5%48.5%48.5%48.5%

50.9%50.9%50.9%50.9%

49.6%49.6%49.6%49.6%

49.7%49.7%49.7%49.7%

40%

42%

44%

46%

48%

50%

52%

54%

CY10 CY11 CY12 CY13 CY14 CY15 CY16F

*cost-to-income ratio at 49.7% after stripping off CY15 exceptional items; i.e. CIMB (RM684m costs), RHBC (RM309m costs), AMMB (RM216m net gain), MAY (RM197m gain), HLB (RM172m costs)


Credit costs to remain high.Credit costs to remain high.Credit costs to remain high.Credit costs to remain high. We believe that the days of high

recoveries are at its tail-end, which explains our elevated credit

cost assumption in 2016 compared to the years prior to 2015.

Although credit costs at CIMB’s Indonesian operations is likely

to ease in 2016 (with expectation of a better 2H16), we have

conservatively assumed credit cost to remain high at CIMB

(71bps vs FY15 78bps).

Malaysian Banks: Credit cost trends

1.16%

1.02%

1.08%

1.12%

0.80%

0.68%

0.71%

0.49%

0.28%

0.16%

0.20%

0.18% 0.34%

0.35%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

CY03

CY04

CY05

CY06

CY07

CY08

CY09

CY10

CY11

CY12

CY13

CY14

CY15

CY16F


Difficult to ascertain a significant turn in the asset quality cycle Difficult to ascertain a significant turn in the asset quality cycle Difficult to ascertain a significant turn in the asset quality cycle Difficult to ascertain a significant turn in the asset quality cycle

when no signs are imminent.when no signs are imminent.when no signs are imminent.when no signs are imminent. Banks are undoubtedly cautious

despite no apparent deterioration being noted yet. We

understand that vulnerable sectors such as those with

exposure to steel, oil and gas as well as commodities are being

closely monitored to contain risk. Banks shown as principal

bankers of companies in challenging sectors are not necessarily

at risk, as this is not a direct indication of credit exposure.

Exposure to oil and gas is less than 5% of total loans, based on

what the banks have disclosed during the recent analyst

briefings. CIMB and MAY have additionally disclosed that

exposure to commodities in general stands at 10.5% and

7.16%. We believe that if all these exposures turn sour, which

is highly unlikely, only PBK, HLB and AFG will be the least

affected. Regardless, the further deterioration of

macroeconomic conditions could pose risks to NPL formation.

We currently still expect NPLs to remain fairly stable in 2016.

Malaysian Banks: Oil & gas exposure

BanksBanksBanksBanks Oil & gas exposure to total loansOil & gas exposure to total loansOil & gas exposure to total loansOil & gas exposure to total loans

AFGAFGAFGAFG <1%

AMMBAMMBAMMBAMMB <5%

CIMBCIMBCIMBCIMB 3%

HLBHLBHLBHLB <0.5%

MAYMAYMAYMAY 2.76%

PBKPBKPBKPBK n.m

RHBCRHBCRHBCRHBC 3%

*MAY’s exposure refers to exposure to energy in general


Malaysian Banks: NPL ratios

2.4%2.4%2.4%2.4%2.0%2.0%2.0%2.0%

1.8%1.8%1.8%1.8% 1.8%1.8%1.8%1.8% 1.8%1.8%1.8%1.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%


AMMB AFFIN CIMB

HLB MAY PBK

RHBC AFG Sector ex PBK



Industry Focus

Malaysian Banks

CapitalCapitalCapitalCapital----raising spree since 2014.raising spree since 2014.raising spree since 2014.raising spree since 2014. Malaysian banks started to

address capital concerns over the past few years and have

aggressively speeded this up since 2014. So far, Affin, PBK,

RHBC, HLB and HLFG have resorted to a rights issue, while

MAY and CIMB undertook a private placement back in 2012

and early 2014 respectively. With this, we believe the

Malaysian banks have largely addressed their capital concerns,

with only CIMB and AMMB yet to do so. Recalibration of risk-

weighted assets seems to be the route taken to address this

issue for now. But we believe the market, to some extent, is

pricing in capital-raising risks to its valuation.

Malaysian Banks: Fully-loaded CET-1 (estimated) (2015)

16.4%

14.3%

17.1%

15.2%16.2%

17.7%

15.5%16.1%

12.3%

11.9% 11.3%

11.7%

14.4% 14.5%

12.0%

12.3%

9.3% 11.7% 11.3% 10.1% 11.6% 12.0% 10.2% 12.0%0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

AMMB Affin AFG CIMB HLB MAY PBK RHBC

Total CAR Tier 1 CET1 Fully loaded (est)


Malaysian banks: Capital-raising activities

BankBankBankBank Capital Capital Capital Capital raisingraisingraisingraising

Date Date Date Date announcedannouncedannouncedannounced

Date Date Date Date CompletedCompletedCompletedCompleted

Amount Amount Amount Amount (RMbn)(RMbn)(RMbn)(RMbn)

Purpose of equity raisingPurpose of equity raisingPurpose of equity raisingPurpose of equity raising Rights Rights Rights Rights price price price price (RM)(RM)(RM)(RM)

Disc %Disc %Disc %Disc % from from from from TERPTERPTERPTERP

New New New New shares shares shares shares issued issued issued issued (m)(m)(m)(m)

% of % of % of % of share share share share capcapcapcap

HLFG Rights Issue 12-Aug-2015 Dec-15 1.1 Fund HLB's rights issue as well as strengthen capital

11.60 20% 95 9%

HLB Rights Issue 12-Aug-2015 Dec-15 3.0 Strengthen capital for growth and Basel III

10.40 23% 288 16%

RHBC Rights Issue 13-Apr-2015 Dec-15 2.5 Strengthen capital for growth and Basel III

4.82 20% 518 20%

PBK Rights Issue 30-Apr-2014 Aug-14 5.0 Strengthen capital for growth and Basel III

13.80 29% 350 10%

AFFIN Rights Issue 10-Mar-2014 Jul-14 1.3 Acquisition of HwangDBS businesses

2.87 25% 448 30%

CIMB Private Placement

13-Jan-2014 Jan-14 3.6 Strengthen capital for Basel III 7.10 na 500 6%

MAY Private Placement

12-Oct-2012 Oct-12 3.7 Strengthen capital for growth and Basel III

8.88 na 412 5%

HLB

Rights Issue 11-Mar-2011 Sep-11 2.6 Acquisition of EON Capital 8.65 30% 300 19%


Industry Focus

Malaysian Banks

Valuation and recommendation

Valuations remain at allValuations remain at allValuations remain at allValuations remain at all----time lows.time lows.time lows.time lows. Malaysian banks are

currently trading at -2SD of its 10-year mean, the lowest since

2009. At current valuations, we believe most of the negatives

are priced in, except for a significant upset in asset quality

indicators, which in our view, should remain manageable.

However, we find it challenging to be bullish on the sector as

there is still no general improvement in key trends. Almost all

banks are currently trading at or just slightly above -2SD.

Malaysian Banks: Forward rolling PBV band

Mean, 1.62

+1SD, 1.86

+2SD, 2.09

-1SD, 1.39

-2SD, 1.16

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

05 06 07 08 09 10 11 12 13 14 15 16

PBV (X)PBV (X)PBV (X)PBV (X)

Source: Bloomberg Finance L.P., DBS Bank, AllianceDBS

NewNewNewNew----normal ROEs post normal ROEs post normal ROEs post normal ROEs post capitalcapitalcapitalcapital----raising are raising are raising are raising are down down down down a notch.a notch.a notch.a notch. The

average ROE level in 2016 after accounting for capital-raising is

11%. Technically, this would warrant a lower P/BV multiple for

the banks’ valuation. All banks, except AMMB and AFG, have

raised CET1 capital over the past 2-3 years. CIMB and AMMB

are the only two that may see capital-raising risks. Assuming

that they do carry out a rights issue to push its fully loaded CET1

ratio to 11%, sector ROE would shift down further to c. 9%.

Malaysian Banks: ROE

15.5%15.5%15.5%15.5% 14.6%14.6%14.6%14.6%12.8%12.8%12.8%12.8%

10.3%10.3%10.3%10.3% 10.0%10.0%10.0%10.0%

0%

5%

10%

15%

20%

25%



PBK RHBC AFG Sector


Valuations may stagnate until a visible improvement is seen in Valuations may stagnate until a visible improvement is seen in Valuations may stagnate until a visible improvement is seen in Valuations may stagnate until a visible improvement is seen in

the sector. the sector. the sector. the sector. We do not expect a general improvement in the

fundamentals of the Malaysian banking sector. NIM

compression remains a feature, and coupled with slower loan

growth, net interest income or top line growth will remain

muted. Capital markets are still expected to stay sluggish.

Although we understand that pipelines are strong, companies

have held back plans for corporate activities in an uncertain

macro environment. With this, revenue growth would be weak

in 2016. It would not be appropriate to track the pre-provision

profit for 2016, as it will be distorted by lower expenses with

banks seeing higher costs booked for staff rationalisation

exercises in 2015. Pre-provision profit would be artificially

boosted in 2016. Similarly, provisions would be lower y-o-y after

accounting for kitchen sinking activities, especially for CIMB.

These would all distort 2016 earnings growth. Hence, while

earnings growth is forecast at 8% (4% excluding one-off items),

it is nevertheless just cosmetic and should not warrant too much

excitement.

Segregating the banks. Segregating the banks. Segregating the banks. Segregating the banks. We classify Malaysian banks into three

groups to distinguish our preferences: (1) resilient banks with no

capital-raising or asset quality issues and strong business drivers

– PBK and HLB, which are our top picks, (2) banks which have

raised capital, with moderate asset quality indicators and

looking to re-energise business growth – RHBC; with MAY and

CIMB at the borderline, and (3) banks which may face capital-

raising risks, have asset quality problems or struggle to find a

business direction – Affin and AMMB. BIMB remains a niche

play while HLFG should ride on a potential restructuring theme.

Stay safe; PBK and HLB reStay safe; PBK and HLB reStay safe; PBK and HLB reStay safe; PBK and HLB remain our top picks.main our top picks.main our top picks.main our top picks. As we comb

through the Malaysian banks under our coverage, we conclude

that the only two banks to overweight in a Malaysian portfolio

would be PBK and HLB. Both have strong asset quality attributes

and both are expected to see loan growth driven by mortgages

from strong pipelines built up in the past few quarters.

PBK to remain a champion of growth and asset qualityPBK to remain a champion of growth and asset qualityPBK to remain a champion of growth and asset qualityPBK to remain a champion of growth and asset quality .Little

need to be said about PBK’s solid attributes, as its earnings

deliveries speak for itself. We expect PBK to consistently defy

headwinds and grow above the industry average. Its cost-to-

income ratio, which ranks way below the industry average, is

admirable. Its premium valuation over peers is justifiable, in our

view. PBK is a BUY with RM21.95 TP.

HLB, waiting for HLB, waiting for HLB, waiting for HLB, waiting for the next leap.the next leap.the next leap.the next leap. HLB should start to re-rate now

that capital-raising issues are a thing of the past. The key risk to

HLB’s earnings would be its contribution from its associate Bank

of Chengdu. Bank of Chengdu has contributed 14% of pre-tax

Industry Focus

Malaysian Banks

profit in the past but this is likely to wane in this financial year

due to weakness in the operating environment in China. HLB’s

other strong attribute is its strong liquidity position, with the

lowest loan-to-deposit ratio among peers. While many would

argue that its liquidity coverage ratio should be in focus, we

believe the analyst fraternity will still fall back on a quantifiable

metric such as the loan-to-deposit ratio to form a judgement.

HLB is also a BUY with RM14.70 TP.

HLFG, hopes of corporate streamlining remHLFG, hopes of corporate streamlining remHLFG, hopes of corporate streamlining remHLFG, hopes of corporate streamlining remains.ains.ains.ains. HLFG, the

parent company of HLB, is expected to deliver earnings growth

that is similar to HLB, as its earnings still mainly hinges on HLB

(c.90%). Its insurance business has seen strong growth in the

past, but that is expected to moderate as the focus will be on

housekeeping and tightened criteria for new policies in the near

term. A rising interest rate environment would be positive for

HLA. Its investment banking business is expected to stay small

and niche. Although small (c.3%), its investment banking unit

has been gradually expanding market share in equity and debt

issues, as well as in stockbroking. We have a BUY

recommendation and RM16.70 TP, based on sum-of-parts

metric. We believe a corporate streamlining within the group

would be imminent as the exercise would eliminate

administrative overlaps and reduce regulatory compliance costs.

The potential corporate streamlining will allow investors to focus

on only two listed operating entities – the banking arm, HLB,

and ideally, its insurance arm, HLA – to unlock value within

HLFG.

RHBC to start on a cleaner slate in 2016.RHBC to start on a cleaner slate in 2016.RHBC to start on a cleaner slate in 2016.RHBC to start on a cleaner slate in 2016. Our BUY rating on

RHBC is based on a cleaner start to 2016 but a significant re-

rating would only be possible once its business growth starts to

show a sustainable trend. By 2Q15, RHBC should be ready to

unveil its new corporate structure with improved capital levels

and having cleaned up its debt. Our RM7.00 TP for RHBC

reflects its new corporate structure.

MAY is a HOLD, MAY is a HOLD, MAY is a HOLD, MAY is a HOLD, trends are not looking greattrends are not looking greattrends are not looking greattrends are not looking great.... MAY’s

revenues have been volatile, skewed largely by forex and

insurance. We expect such trends to persist. Stripping off

these volatilities, MAY’s revenues may not be as exciting. In

FY15, MAY’s astounding loan growth soared to low-teens but

this is due to forex translation from its regional operations,

especially Singapore and Indonesia amid the weak RM. On a

constant-currency basis, loan growth was at 6%. Provisions

doubled in FY15 and we are unsure if this trend would

persist. MAY has guided for higher credit costs in 2016.

MAY’s Indonesian operations turned around well towards the

end of 2015 and hopes of stable growth could moderate

earnings erosion. Disappointing trends were noted as loan

loss coverage and dividends headed lower. Our TP for MAY is

RM8.90.

CIMB’s valuations havCIMB’s valuations havCIMB’s valuations havCIMB’s valuations have bottomed but there is no catalyst for e bottomed but there is no catalyst for e bottomed but there is no catalyst for e bottomed but there is no catalyst for

a rea rea rea re----rating yet.rating yet.rating yet.rating yet. We also struggle to identify an inflection point

for CIMB. While we are inclined to believe that the worst of

provisions would be over in 2015, its Indonesian operations

could drag earnings by another two quarters before

recovering. With restructuring costs largely booked in 2015, it

may imply lower levels in 2016. Stripping these out, CIMB’s

revenue growth has limited traction to excite. NIM

compression may be steeper than its peers, due to a

combination of deposit competition in Malaysia and the

change in its business mix in Indonesia. Similar to MAY, CIMB

would also book high loan growth in 2015 due to forex

translation differences. At sub-10% ROE, we find it difficult to

justify a valuation multiple above 1x P/BV. Potential capital-

raising, though denied by management, could pose further

downside risk to valuations. We have a HOLD rating with

RM4.60 TP for CIMB.

AMMB continues to deliver subAMMB continues to deliver subAMMB continues to deliver subAMMB continues to deliver sub----par growth.par growth.par growth.par growth. AMMB is

another Malaysian bank which saw its share price plummet

spectacularly in 2015. Plagued by persistent NIM compression

and below-industry loan growth on account of portfolio

rebalancing which has been ongoing for the past five years,

we see limited upside to share price performance from here.

Adding to its woes is the unprecedented penalty imposed by

BNM for non-compliance arising from weaknesses in its

reporting systems and processes. Furthermore, a new CEO

has just been appointed and we believe that he will have a

daunting task to rebuild the bank’s business. There has been

ongoing chatter on a possible sell-out by ANZ and Tan Sri

Azman Hashim, each holding 23.8% and 13.7% of AMMB.

Such newsflow could precipitate possible M&A actions. We

advise investors to watch this space. We currently have a

HOLD recommendation and RM4.60 TP.

Affin stays an underdog, our only FULLY VALUED call.Affin stays an underdog, our only FULLY VALUED call.Affin stays an underdog, our only FULLY VALUED call.Affin stays an underdog, our only FULLY VALUED call. Affin’s

earnings disappointed in 2015 and failed to meet all its KPIs

set for the year. While the acquisition of HwangDBS’

businesses in 2014 lifted Affin’s non-interest income

contribution to total income, its earnings traction has failed to

pick up because of soft capital markets. Provisions and

sluggish loan growth have dented its commercial banking

business and we see no light at the end of the tunnel for a re-

rating. Any further asset quality deterioration could pose

downside risks to earnings. We see no catalysts to re-rate its

share price in the near term, as loan growth is expected to

remain sluggish, recoveries to moderate and NIM pressure to

Industry Focus

Malaysian Banks

persist. Our TP for Affin is RM1.80 and we believe the stock

would likely continue to trade below its BV.

BIMB’s niche position holds potential but weak consumer BIMB’s niche position holds potential but weak consumer BIMB’s niche position holds potential but weak consumer BIMB’s niche position holds potential but weak consumer

sentiment to dampen upside.sentiment to dampen upside.sentiment to dampen upside.sentiment to dampen upside. We see value in BIMB’s niche

position as the only listed Shariah-compliant bank on Bursa

but the persistently weak consumer sentiment could weigh on

BIMB’s prospects. Consumer loans make up just over 60% of

BIMB’s loan portfolio, with the bulk being personal and

housing loans. BIMB’s loan growth has shown slower growth

in FY15 since recording more than 20% loan growth in the

past three years. Positively, asset quality has been relatively

stable. We have a HOLD rating on BIMB with a RM3.85 TP.

Malaysian Banks: Sector valuation Banking GroupBanking GroupBanking GroupBanking Group Market Market Market Market

capcapcapcap PricePricePricePrice Target Target Target Target

PricePricePricePrice RatingRatingRatingRating PE PE PE PE (x)(x)(x)(x) CAGRCAGRCAGRCAGR PBV (x)PBV (x)PBV (x)PBV (x) ROE (%)ROE (%)ROE (%)ROE (%) Net div Net div Net div Net div

(%)(%)(%)(%) (US$bn)(US$bn)(US$bn)(US$bn) (RM/s)(RM/s)(RM/s)(RM/s) (RM/s)(RM/s)(RM/s)(RM/s) CY14ACY14ACY14ACY14A CY15FCY15FCY15FCY15F CY16FCY16FCY16FCY16F ^ (%)^ (%)^ (%)^ (%) CY14ACY14ACY14ACY14A CY15FCY15FCY15FCY15F CY16FCY16FCY16FCY16F CY15FCY15FCY15FCY15F CY15FCY15FCY15FCY15F

Affin HoldingsAffin HoldingsAffin HoldingsAffin Holdings 990 2.15 1.80

FULLY VALUED 7.0x 11.3x 10.4x -17.8 0.5x 0.5x 0.5x 4.8% 3.8%

Alliance*Alliance*Alliance*Alliance* 1,319 3.65 NA NA 10.5x 10.9x 10.7x -0.9 1.3x 1.2x 1.2x 11.2% 4.1% AMMBAMMBAMMBAMMB 3,094 4.33 4.60 HOLD 6.9x 8.6x 9.0x -12.4 0.9x 0.9x 0.8x 9.0% 4.6% CIMB GroupCIMB GroupCIMB GroupCIMB Group 9,136 4.52 4.60 HOLD 12.1x 13.4x 10.8x 5.8 1.0x 0.9x 0.9x 8.6% 4.2% Hong LeongHong LeongHong LeongHong Leong 6,392 13.14 14.70 BUY 11.4x 11.8x 12.1x -3.0 1.6x 1.4x 1.3x 11.0% 2.5% MaybankMaybankMaybankMaybank 19,691 8.51 8.90 HOLD 11.5x 11.9x 11.9x -1.5 1.5x 1.3x 1.2x 10.8% 6.3% Public BankPublic BankPublic BankPublic Bank 16,914 18.48 21.95 BUY 15.9x 14.2x 13.3x 9.4 2.6x 2.3x 2.1x 16.5% 3.1% RHB CapitalRHB CapitalRHB CapitalRHB Capital 3,863 5.30 7.00 BUY 6.9x 9.9x 8.5x -9.8 0.8x 0.7x 0.7x 8.2% 3.5%

Weighted averageWeighted averageWeighted averageWeighted average 12.2x12.2x12.2x12.2x 12.4x12.4x12.4x12.4x 11.7x11.7x11.7x11.7x 1.11.11.11.1 1.6x1.6x1.6x1.6x 1.5x1.5x1.5x1.5x 1.4x1.4x1.4x1.4x 11.7%11.7%11.7%11.7% 4.4%4.4%4.4%4.4% Weighted average (exWeighted average (exWeighted average (exWeighted average (ex----Public Bank)Public Bank)Public Bank)Public Bank) 10.8x10.8x10.8x10.8x 11.7x11.7x11.7x11.7x 11.1x11.1x11.1x11.1x ----2.02.02.02.0 1.3x1.3x1.3x1.3x 1.2x1.2x1.2x1.2x 1.1x1.1x1.1x1.1x 9.9%9.9%9.9%9.9% 4.8%4.8%4.8%4.8% Simple averageSimple averageSimple averageSimple average 10.3x10.3x10.3x10.3x 11.5x11.5x11.5x11.5x 10.8x10.8x10.8x10.8x ----3.83.83.83.8 1.3x1.3x1.3x1.3x 1.2x1.2x1.2x1.2x 1.1x1.1x1.1x1.1x 10.210.210.210.2%%%% 4.1%4.1%4.1%4.1% Simple average (exSimple average (exSimple average (exSimple average (ex----Public Bank)Public Bank)Public Bank)Public Bank) 9.5x9.5x9.5x9.5x 11.1x11.1x11.1x11.1x 10.5x10.5x10.5x10.5x ----5.75.75.75.7 1.1x1.1x1.1x1.1x 1.0x1.0x1.0x1.0x 0.9x0.9x0.9x0.9x 9.5%9.5%9.5%9.5% 4.2%4.2%4.2%4.2%

BIMBBIMBBIMBBIMB 1,356 3.60 3.85 HOLD 10.1x 10.0x 10.1x 41.9 1.8x 1.6x 1.5x 15.4% 3.2% Hong Leong Financial Hong Leong Financial Hong Leong Financial Hong Leong Financial GroupGroupGroupGroup 3,795 13.98 16.70 BUY 8.8x 9.3x 9.1x -0.4 1.2x 1.1x 1.0x 11.3% 2.4%

* Based on Bloomberg consensus

^ Refers to a 2-year EPS CAGR for CY14-16F

Source: Companies, Bloomberg Finance L.P., DBS Bank, AllianceDBS

Industry Focus

Malaysian Banks

AppendixAppendixAppendixAppendix

Industry Focus

Malaysian Banks

PBK: Loan and NPL trend

FYEFYEFYEFYE DECDECDECDEC DECDECDECDEC DECDECDECDEC DECDECDECDEC DECDECDECDEC Dec-14Dec-14Dec-14Dec-14 Mar-15Mar-15Mar-15Mar-15 Jun-15Jun-15Jun-15Jun-15 Sep-15Sep-15Sep-15Sep-15 Dec-15Dec-15Dec-15Dec-15

Gros s loansGros s loansGros s loansGros s loans FY11FY11FY11FY11 FY12FY12FY12FY12 FY13FY13FY13FY13 FY14FY14FY14FY14 FY15FY15FY15FY15 4QCY144QCY144QCY144QCY14 1QCY151QCY151QCY151QCY15 2QCY152QCY152QCY152QCY15 3QCY153QCY153QCY153QCY15 4QCY154QCY154QCY154QCY15

Purchase of Securities 1,855.9 4,127.0 4,023.5 2,735.3 2,492.9 2,735.3 2,461.6 2,568.1 2,412.3 2,492.9

Purchase of Transport Vehicles 38,947.1 42,238.6 45,158.5 48,537.2 52,423.6 48,537.2 49,779.7 50,274.1 51,600.8 52,423.6

Broad Property Sector 91,177.9 108,286.2 126,004.3 141,982.7 159,650.2 141,982.7 147,239.1 151,294.7 156,139.0 159,650.2

- Residential (include Cagamas) 52,207.2 61,130.7 70,928.3 79,378.9 89,521.8 79,378.9 81,722.2 84,046.0 87,103.9 89,521.8

- Non Residential 38,970.8 47,155.5 55,076.0 62,603.8 70,128.4 62,603.8 65,517.0 67,248.7 69,035.1 70,128.4

Non-Land Fixed Assets 270.0 298.6 242.1 245.1 209.7 245.1 252.7 261.2 215.4 209.7

Personal Use 9,721.8 9,318.1 9,090.5 9,401.6 10,577.0 9,401.6 9,591.2 9,776.5 10,405.7 10,577.0

Credit Cards 1,522.3 1,604.2 1,623.3 1,664.1 1,781.2 1,664.1 1,686.9 1,641.7 1,675.1 1,781.2

Consumption Cr/Consumer Durables 16.8 16.7 16.9 2.4 2.1 2.4 2.6 2.2 2.1 2.1

Construction 1,899.3 2,493.6 2,903.4 3,930.6 5,345.6 3,930.6 4,311.6 4,468.7 4,933.4 5,345.6

Working Capital 27,685.5 25,325.7 28,219.6 32,695.3 36,786.3 32,695.3 33,922.8 34,372.9 36,177.8 36,786.3

Others 4,597.4 4,074.5 3,893.9 3,849.7 4,178.4 3,849.7 3,803.8 4,146.5 4,487.0 4,178.4

Gros s loansGros s loansGros s loansGros s loans 177,694.0177,694.0177,694.0177,694.0 197,783.2197,783.2197,783.2197,783.2 221,175.8221,175.8221,175.8221,175.8 245,044.1245,044.1245,044.1245,044.1 273,447.1273,447.1273,447.1273,447.1 245,044.1245,044.1245,044.1245,044.1 253,051.8253,051.8253,051.8253,051.8 258,806.6258,806.6258,806.6258,806.6 268,048.5268,048.5268,048.5268,048.5 273,447.1273,447.1273,447.1273,447.1

Impaired loansImpaired loansImpaired loansImpaired loans

Purchase of Securities 5.9 5.9 3.5 3.4 4.0 3.4 3.4 3.4 3.4 4.0

Purchase of Transport Vehicles 267.8 263.3 357.5 412.8 358.3 412.8 386.7 384.7 382.7 358.3

Broad Property Sector 660.0 591.8 676.1 669.0 599.8 669.0 646.8 626.2 614.3 599.8

- Residential (include Cagamas) 466.2 420.3 526.9 504.8 445.4 504.8 489.2 459.2 449.4 445.4

- Non Residential 193.8 171.5 149.1 164.2 154.4 164.2 157.6 167.1 164.9 154.4


Personal Use 176.8 165.2 169.3 146.5 138.8 146.5 147.5 138.5 147.9 138.8

Credit Cards 22.3 23.4 23.2 25.4 23.7 25.4 24.8 20.8 21.1 23.7


Construction 33.7 14.1 11.5 12.8 13.4 12.8 13.6 13.3 13.9 13.4

Working Capital 329.5 283.9 223.2 202.8 198.0 202.8 184.5 189.5 218.5 198.0

Others 27.4 20.0 14.6 15.7 15.1 15.7 12.2 16.9 16.0 15.1

Gros s impa ired loansGros s impa ired loansGros s impa ired loansGros s impa ired loans 1,529.71,529.71,529.71,529.7 1,374.11,374.11,374.11,374.1 1,484.81,484.81,484.81,484.8 1,488.71,488.71,488.71,488.7 1,351.81,351.81,351.81,351.8 1,488.71,488.71,488.71,488.7 1,419.71,419.71,419.71,419.7 1,393.41,393.41,393.41,393.4 1,417.81,417.81,417.81,417.8 1,351.81,351.81,351.81,351.8

NPL (%)NPL (%)NPL (%)NPL (%)

Purchase of Securities 0.32% 0.14% 0.09% 0.13% 0.16% 0.13% 0.14% 0.13% 0.14% 0.16%

Purchase of Transport Vehicles 0.69% 0.62% 0.79% 0.85% 0.68% 0.85% 0.78% 0.77% 0.74% 0.68%

Broad Property Sector 0.72% 0.55% 0.54% 0.47% 0.38% 0.47% 0.44% 0.41% 0.39% 0.38%

- Residential (include Cagamas) 0.9% 0.7% 0.7% 0.6% 0.5% 0.6% 0.6% 0.5% 0.5% 0.5%

- Non Residential 0.5% 0.4% 0.3% 0.3% 0.2% 0.3% 0.2% 0.2% 0.2% 0.2%

Non-Land Fixed Assets 2.29% 2.07% 2.48% 0.07% 0.25% 0.07% 0.01% 0.02% 0.03% 0.25%

Personal Use 1.82% 1.77% 1.86% 1.56% 1.31% 1.56% 1.54% 1.42% 1.42% 1.31%

Credit Cards 1.46% 1.46% 1.43% 1.53% 1.33% 1.53% 1.47% 1.27% 1.26% 1.33%

Consumption Cr/Consumer Durables 0.08% 2.25% 0.49% 3.08% 2.74% 3.08% 3.07% 0.05% 0.47% 2.74%

Construction 1.77% 0.57% 0.40% 0.33% 0.25% 0.33% 0.32% 0.30% 0.28% 0.25%

Working Capital 1.19% 1.12% 0.79% 0.62% 0.54% 0.62% 0.54% 0.55% 0.60% 0.54%

Others 0.60% 0.49% 0.37% 0.41% 0.36% 0.41% 0.32% 0.41% 0.36% 0.36%

Gros s loansGros s loansGros s loansGros s loans 0.86%0.86%0.86%0.86% 0.69%0.69%0.69%0.69% 0.67%0.67%0.67%0.67% 0.61%0.61%0.61%0.61% 0.49%0.49%0.49%0.49% 0.61%0.61%0.61%0.61% 0.56%0.56%0.56%0.56% 0.54%0.54%0.54%0.54% 0.53%0.53%0.53%0.53% 0.49%0.49%0.49%0.49%

Loan los s coverage (%)Loan los s coverage (%)Loan los s coverage (%)Loan los s coverage (%) 189%189%189%189% 126%126%126%126% 119%119%119%119% 122%122%122%122% 121%121%121%121% 122%122%122%122% 128%128%128%128% 129%129%129%129% 131%131%131%131% 121%121%121%121%


Industry Focus

Malaysian Banks

MAY: Loan and NPL trend







- Non Residential 17,500.7 23,967.1 29,271.5 33,489.2 40,122.3 33,489.2 34,704.6 37,251.0 40,022.6 40,122.3

Non-Land Fixed Assets 4,005.4 4,348.9 4,692.2 4,874.6 6,958.4 4,874.6 5,387.5 5,699.3 6,681.4 6,958.4

Personal Use 7,182.9 7,802.4 8,137.9 9,065.1 9,879.5 9,065.1 9,184.9 9,458.2 9,756.3 9,879.5

Credit Cards 6,261.5 6,434.3 6,717.2 7,180.7 8,099.6 7,180.7 7,375.4 7,412.4 7,636.5 8,099.6


Construction 13,626.5 14,089.3 13,206.4 15,764.9 18,051.9 15,764.9 15,448.3 16,593.7 17,870.3 18,051.9

Working Capital 104,214.8 111,403.5 126,731.3 142,597.8 153,301.4 142,597.8 144,944.1 145,695.2 158,785.2 153,301.4

Others 15,099.7 21,212.5 26,951.0 34,057.7 39,155.4 34,057.7 33,369.4 37,650.0 41,906.7 39,155.4


Impa ired loansImpa ired loansImpa ired loansImpa ired loans



Broad Property Sector 1,437.9 705.4 573.9 515.5 755.1 515.5 573.4 596.4 671.7 755.1

- Residential (include Cagamas) 1,227.7 566.4 454.9 392.3 518.7 392.3 433.2 447.8 498.1 518.7

- Non Residential 210.2 139.0 119.0 123.2 236.4 123.2 140.2 148.6 173.6 236.4

Personal Use 135.7 121.8 120.7 141.8 143.8 141.8 113.4 129.9 146.3 143.8

Credit Cards 98.4 77.5 76.0 73.3 98.1 73.3 87.2 90.9 102.1 98.1


Construction 528.6 227.5 197.1 1,119.1 1,250.3 1,119.1 1,343.1 1,364.7 1,372.4 1,250.3

Working Capital 5,565.8 3,504.6 3,542.0 3,499.9 4,960.9 3,499.9 3,291.1 3,540.5 3,712.9 4,960.9

Others 614.1 718.4 556.6 524.7 640.3 524.7 368.9 450.5 437.1 640.3







- Non Residential 1.2% 0.6% 0.4% 0.4% 0.6% 0.4% 0.4% 0.4% 0.4% 0.6%

Personal Use 1.89% 1.56% 1.48% 1.56% 1.46% 1.56% 1.23% 1.37% 1.50% 1.46%

Credit Cards 1.57% 1.20% 1.13% 1.02% 1.21% 1.02% 1.18% 1.23% 1.34% 1.21%


Construction 3.88% 1.61% 1.49% 7.10% 6.93% 7.10% 8.69% 8.22% 7.68% 6.93%

Working Capital 5.34% 3.15% 2.79% 2.45% 3.24% 2.45% 2.27% 2.43% 2.34% 3.24%

Others 4.07% 3.39% 2.07% 1.54% 1.64% 1.54% 1.11% 1.20% 1.04% 1.64%




Industry Focus

Malaysian Banks

CIMB: Loan and NPL trend


Gros s LoansGros s LoansGros s LoansGros s Loans FY11FY11FY11FY11 FY12FY12FY12FY12 FY13FY13FY13FY13 FY14FY14FY14FY14 FY15FY15FY15FY15 4QCY144QCY144QCY144QCY14 1QCY151QCY151QCY151QCY15 2QCY152QCY152QCY152QCY15 3QCY153QCY153QCY153QCY15 4QCY154QCY154QCY154QCY15





- Non Residential 12,758.6 15,963.7 17,866.8 20,636.5 25,170.5 20,636.5 21,603.4 22,925.8 25,035.2 25,170.5


Personal Use 6,781.9 7,242.6 8,441.1 8,748.1 10,608.4 8,748.1 8,903.2 9,691.3 10,329.7 10,608.4

Credit Cards 5,604.2 5,690.7 6,440.9 7,575.6 8,843.0 7,575.6 7,749.0 7,934.8 8,367.0 8,843.0


Construction 5,217.2 7,276.3 8,023.1 8,199.5 9,580.4 8,199.5 8,529.1 8,589.3 9,165.8 9,580.4

Working Capital 46,078.5 53,855.5 65,766.7 74,273.3 79,417.6 74,273.3 73,509.7 76,193.9 80,552.7 79,417.6

Others 24,229.6 19,960.0 21,464.8 21,560.7 22,213.0 21,560.7 22,534.0 22,991.0 24,737.8 22,213.0







- Non Residential 406.8 338.9 258.8 214.7 215.0 214.7 223.1 232.0 266.5 215.0

Non-Land Fixed Assets 556.6 416.3 438.9 876.4 911.1 876.4 992.3 980.3 1,327.0 911.1

Personal Use 355.2 244.8 252.9 312.5 265.7 312.5 313.8 325.7 317.8 265.7

Credit Cards 127.6 39.7 94.8 114.5 168.7 114.5 120.1 135.0 158.3 168.7


Construction 1,343.3 1,226.7 1,180.3 1,222.1 1,335.1 1,222.1 1,342.4 1,375.1 1,382.5 1,335.1

Working Capital 3,566.0 2,679.0 2,373.2 2,565.7 3,450.2 2,565.7 2,578.0 3,214.3 3,563.3 3,450.2

Others 1,118.8 805.0 752.9 794.2 718.8 794.2 834.0 833.2 855.4 718.8







- Non Residential 3.2% 2.1% 1.4% 1.0% 0.9% 1.0% 1.0% 1.0% 1.1% 0.9%


Personal Use 5.24% 3.38% 3.00% 3.57% 2.50% 3.57% 3.52% 3.36% 3.08% 2.50%

Credit Cards 2.28% 0.70% 1.47% 1.51% 1.91% 1.51% 1.55% 1.70% 1.89% 1.91%


Construction 25.75% 16.86% 14.71% 14.90% 13.94% 14.90% 15.74% 16.01% 15.08% 13.94%

Working Capital 7.74% 4.97% 3.61% 3.45% 4.34% 3.45% 3.51% 4.22% 4.42% 4.34%

Others 4.62% 4.03% 3.51% 3.68% 3.24% 3.68% 3.70% 3.62% 3.46% 3.24%




Industry Focus

Malaysian Banks

RHBC: Loan and NPL trend







- Non Residential 5,277.2 5,730.1 7,448.7 10,634.0 12,849.6 10,634.0 11,405.5 11,758.3 12,084.9 12,849.6


Personal Use 4,951.6 5,758.1 7,193.8 7,650.3 8,331.7 7,650.3 7,700.5 7,902.0 8,551.2 8,331.7

Credit Cards 1,780.1 1,926.6 2,004.2 1,994.7 1,979.0 1,994.7 1,976.9 1,952.1 1,935.5 1,979.0


Construction 3,024.2 3,653.7 3,121.2 4,929.2 5,803.8 4,929.2 5,354.5 5,745.3 6,071.4 5,803.8

Working Capital 20,317.6 26,520.3 29,096.5 35,060.9 37,775.8 35,060.9 36,168.4 35,412.6 37,480.3 37,775.8

Others 19,426.6 20,745.0 19,054.1 19,213.6 17,496.4 19,213.6 16,343.1 16,471.3 16,999.1 17,496.4





Broad Property Sector 1,234.5 1,123.2 975.8 965.5 969.6 965.5 956.2 978.0 994.2 969.6

- Residential (include Cagamas) 1,037.4 965.1 876.2 783.9 788.0 783.9 752.6 753.4 761.3 788.0

- Non Residential 197.1 158.1 99.6 181.6 181.6 181.6 203.6 224.6 233.0 181.6


Personal Use 72.9 137.2 150.4 154.4 164.9 154.4 144.5 156.1 165.4 164.9

Credit Cards 89.0 39.4 41.3 36.9 37.2 36.9 33.0 44.3 42.9 37.2


Construction 235.0 160.3 125.1 115.7 105.5 115.7 124.5 124.3 119.6 105.5

Working Capital 1,200.7 1,126.1 1,536.5 1,139.9 1,178.1 1,139.9 1,182.7 1,275.3 1,237.3 1,178.1

Others 25.0 86.8 170.2 42.3 75.7 42.3 54.8 65.7 57.7 75.7







- Non Residential 3.74% 2.76% 1.34% 1.71% 1.41% 1.71% 1.79% 1.91% 1.93% 1.41%


Personal Use 1.47% 2.38% 2.09% 2.02% 1.98% 2.02% 1.88% 1.98% 1.93% 1.98%

Credit Cards 5.00% 2.04% 2.06% 1.85% 1.88% 1.85% 1.67% 2.27% 2.22% 1.88%


Construction 7.77% 4.39% 4.01% 2.35% 1.82% 2.35% 2.32% 2.16% 1.97% 1.82%

Working Capital 5.91% 4.25% 5.28% 3.25% 3.12% 3.25% 3.27% 3.60% 3.30% 3.12%

Others 0.13% 0.42% 0.89% 0.22% 0.43% 0.22% 0.34% 0.40% 0.34% 0.43%




Industry Focus

Malaysian Banks

HLB: Loan and NPL trend

FYEFYEFYEFYE JUNJUNJUNJUN JUNJUNJUNJUN JUNJUNJUNJUN JUNJUNJUNJUN JUNJUNJUNJUN Dec-14Dec-14Dec-14Dec-14 Mar-15Mar-15Mar-15Mar-15 Jun-15Jun-15Jun-15Jun-15 Sep-15Sep-15Sep-15Sep-15 Dec-15Dec-15Dec-15Dec-15


Purchase of Securities 1,151.0 1,030.1 981.3 762.7 704.8 701.6 727.7 704.8 643.0 663.0




- Non Residential 9,050.9 9,985.3 10,858.6 12,370.1 14,231.7 13,403.7 14,002.5 14,231.7 14,550.4 14,754.5

Personal Use 3,572.5 3,576.5 3,502.2 3,370.7 3,523.6 3,430.2 3,513.5 3,523.6 3,714.7 3,734.6

Credit Cards 4,262.9 4,233.4 4,088.1 4,192.2 3,889.3 4,168.2 4,051.4 3,889.3 3,816.4 3,899.2


Construction 835.6 924.7 1,163.9 1,163.0 1,257.9 1,306.6 1,239.5 1,257.9 1,276.1 1,422.8

Working Capital 17,831.5 19,907.5 21,770.2 22,573.4 23,433.0 21,342.2 22,252.1 23,433.0 24,011.3 23,434.2

Others 2,415.5 2,972.7 3,282.3 3,443.6 3,050.6 3,052.3 3,297.7 3,050.6 2,819.4 2,869.1







- Non Residential 79.4 73.4 59.6 47.7 46.2 40.9 36.6 46.2 53.6 51.5

Personal Use 93.7 86.7 72.2 34.9 34.7 32.3 32.7 34.7 35.9 40.9

Credit Cards 58.1 66.9 60.7 53.1 42.9 45.6 41.7 42.9 46.2 55.2

Consumption Cr/Consumer Durables 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Construction 31.1 26.4 9.3 4.4 4.1 19.7 5.5 4.1 4.0 6.8

Working Capital 916.3 649.2 635.3 572.0 365.4 404.1 359.8 365.4 345.9 386.6

Others 52.2 60.7 49.5 79.6 63.1 68.9 67.1 63.1 55.7 51.9

Gros s impa ired loansGros s impa ired loansGros s impa ired loansGros s impa ired loans 1,882.91,882.91,882.91,882.9 1,532.01,532.01,532.01,532.0 1,359.41,359.41,359.41,359.4 1,231.71,231.71,231.71,231.7 948.0948.0948.0948.0 1,051.61,051.61,051.61,051.6 987.7987.7987.7987.7 948.0948.0948.0948.0 967.1967.1967.1967.1 1,013.41,013.41,013.41,013.4






- Non Residential 0.9% 0.7% 0.5% 0.4% 0.3% 0.3% 0.3% 0.3% 0.4% 0.3%

Personal Use 2.62% 2.42% 2.06% 1.04% 0.99% 0.94% 0.93% 0.99% 0.97% 1.10%

Credit Cards 1.36% 1.58% 1.48% 1.27% 1.10% 1.09% 1.03% 1.10% 1.21% 1.42%


Construction 3.72% 2.85% 0.80% 0.38% 0.33% 1.51% 0.45% 0.33% 0.32% 0.48%

Working Capital 5.14% 3.26% 2.92% 2.53% 1.56% 1.89% 1.62% 1.56% 1.44% 1.65%

Others 2.16% 2.04% 1.51% 2.31% 2.07% 2.26% 2.03% 2.07% 1.98% 1.81%




Industry Focus

Malaysian Banks

AHB: Loan and NPL trend







- Non Residential 3,791.4 4,738.3 5,009.1 5,813.7 5,909.2 5,813.7 5,243.7 5,736.7 5,870.6 5,909.2


Personal Use 827.1 964.4 941.0 887.1 745.6 887.1 888.6 766.6 764.4 745.6

Credit Cards 93.1 85.3 82.1 81.9 83.8 81.9 83.6 82.1 82.1 83.8


Construction 1,634.9 2,119.6 2,082.7 3,146.8 3,185.6 3,146.8 3,037.3 2,932.9 2,974.8 3,185.6

Working Capital 9,901.8 9,859.2 10,230.3 11,689.4 13,127.8 11,689.4 11,055.8 12,478.9 12,329.0 13,127.8

Others 560.3 1,253.9 1,224.7 1,214.5 786.5 1,214.5 1,020.7 1,058.8 824.8 786.5







- Non Residential 34.4 26.6 23.7 31.3 42.2 31.3 26.5 27.3 57.6 42.2


Personal Use 12.7 6.7 7.9 7.8 20.5 7.8 5.7 14.3 14.8 20.5

Credit Cards 0.5 0.5 0.5 0.3 0.4 0.3 0.4 0.5 0.3 0.4


Construction 63.5 61.4 65.8 77.1 102.6 77.1 86.3 85.3 118.3 102.6

Working Capital 260.1 281.0 234.9 286.7 372.0 286.7 314.6 384.6 404.1 372.0

Others 1.5 11.2 14.1 16.4 33.3 16.4 20.0 18.3 29.5 33.3

Gros s impaired loansGros s impaired loansGros s impaired loansGros s impaired loans 883.0883.0883.0883.0 790.4790.4790.4790.4 740.9740.9740.9740.9 747.8747.8747.8747.8 834.2834.2834.2834.2 747.8747.8747.8747.8 794.7794.7794.7794.7 861.8861.8861.8861.8 937.5937.5937.5937.5 834.2834.2834.2834.2






- Non Residential 0.9% 0.6% 0.47% 0.54% 0.7% 0.54% 0.51% 0.48% 0.98% 0.7%


Personal Use 1.54% 0.70% 0.84% 0.88% 2.75% 0.88% 0.64% 1.87% 1.93% 2.75%

Credit Cards 0.54% 0.60% 0.58% 0.40% 0.46% 0.40% 0.51% 0.56% 0.42% 0.46%


Construction 3.89% 2.90% 3.16% 2.45% 3.22% 2.45% 2.84% 2.91% 3.98% 3.22%

Working Capital 2.63% 2.85% 2.30% 2.45% 2.83% 2.45% 2.85% 3.08% 3.28% 2.83%

Others 0.27% 0.89% 1.15% 1.35% 4.24% 1.35% 1.96% 1.73% 3.58% 4.24%


Loan los s cove rage (%)Loan los s cove rage (%)Loan los s cove rage (%)Loan los s cove rage (%) 73%73%73%73% 71%71%71%71% 74%74%74%74% 76%76%76%76% 64%64%64%64% 76%76%76%76% 68%68%68%68% 64%64%64%64% 61%61%61%61% 64%64%64%64%


Industry Focus

Malaysian Banks

AFG: Loan and NPL trend

FYEFYEFYEFYE MARMARMARMAR MARMARMARMAR MARMARMARMAR MARMARMARMAR MARMARMARMAR Dec-14Dec-14Dec-14Dec-14 Mar-15Mar-15Mar-15Mar-15 Jun-15Jun-15Jun-15Jun-15 Sep-15Sep-15Sep-15Sep-15 Dec-15Dec-15Dec-15Dec-15


Purchase of Securities 342.1 394.4 823.3 1,607.3 1,597.2 1,571.9 1,597.2 1,518.2 1,435.4 1,492.2

Purchase of Transport Vehicles 746.7 590.5 661.8 1,117.8 1,427.0 1,381.2 1,427.0 1,369.7 1,305.9 1,252.1



- Non Residential 2,789.1 3,229.2 3,587.4 4,760.6 6,450.5 5,980.3 6,450.5 6,568.0 6,614.9 6,725.8


Personal Use 2,141.9 2,155.8 1,981.7 2,047.3 2,276.1 2,219.7 2,276.1 2,371.2 2,465.2 2,518.0

Credit Cards 679.8 635.8 617.5 601.3 653.1 672.8 653.1 655.0 663.1 680.1

Construction 222.2 193.9 312.2 436.3 564.1 544.0 564.1 502.0 604.2 661.3

Working Capital 5,413.8 5,934.9 6,093.7 6,379.8 6,623.1 6,383.3 6,623.1 6,531.0 6,773.5 6,911.7

Others 606.7 1,518.0 1,892.7 1,756.0 1,985.1 1,940.4 1,985.1 2,211.1 2,361.3 2,475.8



Purchase of Securities 10.3 5.4 5.1 5.2 0.5 0.7 0.5 0.0 0.1 -




- Non Residential 74.4 75.3 68.7 31.4 22.0 19.9 22.0 17.0 48.4 46.4

Non-Land Fixed Assets 0.2 0.2 0.2 0.1 0.5 - 0.5 0.9 1.2 1.0

Personal Use 37.2 31.1 32.1 30.3 27.2 33.2 27.2 30.9 34.2 37.3

Credit Cards 12.7 9.9 9.1 7.8 7.6 8.5 7.6 8.7 8.7 8.8

Construction 12.8 11.9 11.3 7.2 4.0 5.1 4.0 3.5 3.6 3.8

Working Capital 316.0 256.9 197.3 92.8 58.2 53.9 58.2 60.7 77.4 72.4

Others 59.9 41.4 36.1 35.4 18.5 19.3 18.5 18.8 9.7 14.8

Gros s impa ired loansGros s impa ired loansGros s impa ired loansGros s impa ired loans 741.3741.3741.3741.3 629.2629.2629.2629.2 579.2579.2579.2579.2 442.8442.8442.8442.8 380.7380.7380.7380.7 405.6405.6405.6405.6 380.7380.7380.7380.7 376.1376.1376.1376.1 426.7426.7426.7426.7 418.3418.3418.3418.3






- Non Residential 2.67% 2.33% 1.91% 0.66% 0.34% 0.33% 0.34% 0.26% 0.73% 0.69%


Personal Use 1.73% 1.44% 1.62% 1.48% 1.19% 1.49% 1.19% 1.30% 1.39% 1.48%

Credit Cards 1.87% 1.56% 1.47% 1.31% 1.17% 1.26% 1.17% 1.33% 1.32% 1.29%

Construction 5.75% 6.12% 3.63% 1.66% 0.71% 0.94% 0.71% 0.71% 0.59% 0.58%

Working Capital 5.84% 4.33% 3.24% 1.46% 0.88% 0.84% 0.88% 0.93% 1.14% 1.05%

Others 9.87% 2.73% 1.91% 2.01% 0.93% 1.00% 0.93% 0.85% 0.41% 0.60%




Industry Focus

Malaysian Banks

Ind: Loan and NPL trend

Gros s loansGros s loansGros s loansGros s loans CY11CY11CY11CY11 CY12CY12CY12CY12 CY13CY13CY13CY13 CY14CY14CY14CY14 CY14CY14CY14CY14 4QCY144QCY144QCY144QCY14 1QCY151QCY151QCY151QCY15 2QCY152QCY152QCY152QCY15 3QCY153QCY153QCY153QCY15 4QCY154QCY154QCY154QCY15





- Non Residential 110,038.6 131,375.0 154,619.8 178,050.3 196,990.7 178,050.3 184,938.8 189,938.2 194,565.5 196,990.7


Personal Use 50,770.5 55,292.3 57,945.2 60,169.1 63,701.9 60,169.1 59,769.6 61,319.5 62,461.5 63,701.9

Credit Cards 32,684.7 33,261.2 35,058.9 35,604.3 36,043.9 35,604.3 35,588.5 34,723.0 34,746.6 36,043.9


Construction 25,322.9 30,705.1 33,693.4 39,625.0 42,656.1 39,625.0 39,444.9 39,754.0 41,276.1 42,656.1

Working Capital 252,891.3 263,978.5 288,444.1 316,157.4 349,173.1 316,157.4 320,898.3 328,437.1 345,234.2 349,173.1

Others 64,754.5 69,872.0 68,490.8 65,909.2 64,338.3 65,909.2 61,875.7 64,589.5 65,975.6 64,338.3

Gros s loansGros s loansGros s loansGros s loans 1,003,504.31,003,504.31,003,504.31,003,504.3 1,107,983.51,107,983.51,107,983.51,107,983.5 1,225,656.21,225,656.21,225,656.21,225,656.2 1,339,718.01,339,718.01,339,718.01,339,718.0 1,445,139.31,445,139.31,445,139.31,445,139.3 1,339,718.01,339,718.01,339,718.01,339,718.0 1,361,908.01,361,908.01,361,908.01,361,908.0 1,387,694.61,387,694.61,387,694.61,387,694.6 1,424,060.21,424,060.21,424,060.21,424,060.2 1,445,139.31,445,139.31,445,139.31,445,139.3






- Non Residential 1,398.5 1,281.2 1,195.7 1,341.2 1,786.5 1,341.2 1,554.2 1,625.2 1,877.0 1,786.5


Personal Use 974.0 1,010.0 997.0 1,023.2 1,191.7 1,023.2 1,028.3 1,000.6 1,041.5 1,191.7

Credit Cards 572.9 437.5 452.0 431.2 479.8 431.2 442.0 447.5 469.1 479.8


Construction 2,132.9 1,697.8 1,678.1 2,755.4 2,494.4 2,755.4 2,266.5 2,434.0 2,482.4 2,494.4

Working Capital 10,825.3 8,696.5 9,154.1 7,889.3 8,432.0 7,889.3 8,165.8 8,182.6 8,327.3 8,432.0

Others 1,790.6 1,257.1 1,161.2 1,090.7 1,522.3 1,090.7 1,148.6 1,401.7 1,402.7 1,522.3







- Non Residential 1.27% 0.98% 0.77% 0.75% 0.91% 0.75% 0.84% 0.86% 0.96% 0.91%


Personal Use 1.92% 1.83% 1.72% 1.70% 1.87% 1.70% 1.72% 1.63% 1.67% 1.87%

Credit Cards 1.75% 1.32% 1.29% 1.21% 1.33% 1.21% 1.24% 1.29% 1.35% 1.33%


Construction 8.42% 5.53% 4.98% 6.95% 5.85% 6.95% 5.75% 6.12% 6.01% 5.85%

Working Capital 4.28% 3.29% 3.17% 2.50% 2.41% 2.50% 2.54% 2.49% 2.41% 2.41%

Others 2.77% 1.80% 1.70% 1.65% 2.37% 1.65% 1.86% 2.17% 2.13% 2.37%



AppendixAppendixAppendixAppendix AppeAppeAppeAppendixndixndixndix

Industry Focus

Malaysian Banks

Net profitNet profitNet profitNet profit

500

1,000

1,500

2,000

2,500


Net profit (RM m)

4Q14 1Q15 2Q15 3Q15 4Q15

4Q15 sector net profit contracted by 1% q-o-q, drragged mainly by high provisions.

PrePrePrePre----provision profitprovision profitprovision profitprovision profit

500

1,000

1,500

2,000

2,500

3,000

3,500


Pre-provision profit (RM m)

4Q14 1Q15 2Q15 3Q15 4Q15

Pre-provision profits grew by a marginal 1% q-o-q across the sector as revenue growth was negated by higher expenses.

NonNonNonNon----interest income interest income interest income interest income

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


Non-interest income (RM m)

4Q14 1Q15 2Q15 3Q15 4Q15

MAY and HLB reported strong non-interest income on forex gains. RHBC’s non-interest income grew on the back of strong asset management fee and underwriting fee growth.

NonNonNonNon----interest income to total reveneueinterest income to total reveneueinterest income to total reveneueinterest income to total reveneue 31% 34%

22%

27%

20%

36%

22%

40%

38%

38%

20%

30%

23%

29%

23%

34%

35%

35%

23%

30%

27%

25%

24%

33%

32%

32%

25% 27%

24%

31%

26% 3

0%33%

34%

23%

29%

26%

31%

26%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


Non-int income to total revenue

4Q14 1Q15 2Q15 3Q15 4Q15

Correspondingly, HLB and RHBC reported higher non-interest income to total income ratio.

NIMNIMNIMNIM

2.42%

2.09%

2.23%

2.82%

1.95%

2.17%

2.18%

2.03%

2.24%

2.35%

1.83%

1.96%

2.61%

1.80%

2.36%

2.08%

1.96%

2.12%

2.12%

1.94%

2.12%

2.64%

1.78%

2.39%

2.07%

1.94%

2.12%

2.15%

2.10%

2.19%

2.68%

1.78%

2.54%

2.13%

2.07%

2.20%

2.02%

2.04%

2.18%

2.70%

1.81%

2.41%

2.16%

2.12%

2.18%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

AMMB Affin AFG CIMB HLB MAY PBK RHBC Industry(est)

NIM (incl Islamic banking income)

4Q14 1Q15 2Q15 3Q15 4Q15

NIM compression were mixed across the sector, with CIMB, HLB, PBK and RHBC experiencing a lift in NIM while the rest experienced a squeeze. Source: Companies, DBS Bank, AllianceDBS

CostCostCostCost----totototo----income ratioincome ratioincome ratioincome ratio

49%

51%

45%

62%

45% 51%

28%

59%

49%

47%

60%

54%

64%

46% 50%

31%

54%

51%

51% 5

8%

49%

64%

45% 49%

31%

57%

50%54% 60%

45%

59%

45%

45%

30%

77%

52%

63%

60%

48% 55% 61%

49%

30%

57%

53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Cost-to-income

4Q14 1Q15 2Q15 3Q15 4Q15

HLB’s cost to income ratio surged due to the MSS cost incurred. Although AMMB’s incurred a one-off regulatory penalty as well, the surge in cost-to-income ratio is also due to a lower base. PBK’s ratio remains the best in class.

Industry Focus

Malaysian Banks

Loan growth (qLoan growth (qLoan growth (qLoan growth (q----oooo----q)q)q)q)

1%

4%

3%

6%

3%

6%

3%

5%

5%

0%

-1%

4%

2%

3%

2%

3%

1%

2%

-2%

4%

1%

3%

3%

4%

2%

1%

2%

1%

0%

2%

6%

2%

7%

4%

3%

5%

0%

4%

2%

0%

2%

-1%

2%

1%

0%

-4%

-2%

0%

2%

4%

6%

8%


Loan growth (q-o-q)

4Q14 1Q15 2Q15 3Q15 4Q15

Sector loans were flat in 4Q15. MAY registered a contraction in loans. AHB’s strong loan growth was driven by working capital loans.

Deposit growth (qDeposit growth (qDeposit growth (qDeposit growth (q----oooo----q)q)q)q)

5%

3%

2%

7%

2%

5%

3%

6%

5%

2%

-4%

8%

5%

3%

2%

3%

1%

3%

-2%

2%

-2% -1

%

3%

1%

3%

-1%

1%

-1%

-7%

0%

5%

2%

5%

0% 1%

3%

2%

9%

-1%

2%

1%

0%

2%

-1%

1%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%


Deposit growth (q-o-q)

4Q14 1Q15 2Q15 3Q15 4Q15

Sector deposit grew 1% in 4Q15. Deposit competition expected to remain intense.

Loan growth (yLoan growth (yLoan growth (yLoan growth (y----oooo----y)y)y)y)

1%

10%

16%

13%

6%

13%

11%

17%

12%

-2%

6%

15%

12%

9%

14%

12% 14%

11%

-2%

10% 13%

16%

9%

16%

11%

9%

12%

0%

7%

10%

19%

11%

20%

13%

10%

15%

-1%

7% 8

%

13%

10% 12%

12%

6%

10%

-5%

0%

5%

10%

15%

20%

25%


Loan growth (y-o-y)

4Q14 1Q15 2Q15 3Q15 4Q15


Deposit growth (yDeposit growth (yDeposit growth (yDeposit growth (y----oooo----y)y)y)y) 3%

7%

13%

7%

5%

11%

10%

14%

9%

3%

5%

14%

13%

7%

13%

10%

11%

11%

3% 5

%

11%

10%

8%

12%

12%

5%

9%

5%

-6%

8%

18%

11%

14%

10%

7%

11%

1%

0%

5%

13%

10%

9% 9%

1%

8%

-10%

-5%

0%

5%

10%

15%

20%


Deposit growth (y-o-y)

4Q14 1Q15 2Q15 3Q15 4Q15

Loan to deposit ratio (LDR)Loan to deposit ratio (LDR)Loan to deposit ratio (LDR)Loan to deposit ratio (LDR)

95%

80% 85% 91%

80%

92%

88%

90%

88%94%

82%

82% 89%

80%

92%

88%

89%

87%94%

84%

84% 92%

80%

94%

87% 91%

88%95%

90%

85% 93%

80%

96%

90%

93%

90%

94%

86%

88%

91%

81%

95%

90% 95%

90%

0%

20%

40%

60%

80%

100%

120%


LDR

4Q14 1Q15 2Q15 3Q15 4Q15

Industry loan-to-deposit ratio stood at 90%. Source: Companies, DBS Bank, AllianceDBS

CASA to total depositsCASA to total depositsCASA to total depositsCASA to total deposits

20.5%

20.0%

34.8%

35.1%

25.7%

35.2%

25.0%

21.7%

20.3%

19.8%

33.6%

34.4%

25.8%

35.4%

25.0%

22.3%

20.9%

19.5%

34.6%

35.4%

25.6%

35.0%

24.1%

23.4%

21.1%

21.1%

33.6%

34.4%

24.9%

35.0%

24.7%

23.3%

20.4%

19.2%

35.0%

34.4%

25.5%

33.7%

24.2%

24.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%


CASA to total deposit

4Q14 1Q15 2Q15 3Q15 4Q15

Banks continue to focus on shoring up low cost deposits (CASA) to fight NIM compression.

Industry Focus

Malaysian Banks

Credit costsCredit costsCredit costsCredit costs

-0.07%

-0.13%

0.07%

0.40%

-0.05%

0.03%

0.03%

0.03%

-0.07%

0.31%

0.04%

0.20%

-0.01%

0.07%

0.03%

0.03%

0.01%

0.03%

0.04%

0.19%

0.02% 0.09%

0.02%

-0.03%

-0.07%

0.07%

0.05%

0.18%

0.02%

0.17%

0.04%

0.03%

-0.08%

0.05%

0.01%

0.24%

0.05% 0.11%

-0.04%

0.16%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%


Credit cost

4Q14 1Q15 2Q15 3Q15 4Q15

Provisions have started to normalize at most banks, with the exception of AMMB. CIMB’s credit cost remains high due to its Indonesian operations.

Gross NPL ratioGross NPL ratioGross NPL ratioGross NPL ratio

1.9%

1.8%

1.1%

3.1%

1.0%

1.5%

0.6%

2.0%

1.8%

1.8%

2.0%

1.0%

3.2%

0.9%

1.5%

0.6%

2.0%

1.8%

1.8% 2.0%

1.0%

3.3%

0.8%

1.6%

0.5%

2.0%

1.8%

2.0% 2.2%

1.2%

3.4%

0.8%

1.5%

0.5%

1.9%

1.9%

1.8%

1.9%

1.1%

3.0%

0.9%

1.9%

0.5%

1.9%

1.8%

0%

1%

1%

2%

2%

3%

3%

4%

4%

AMMB Affin AFG CIMB HLB MAY PBK RHBC Industry(ex PBK)

Gross NPL ratio

4Q14 1Q15 2Q15 3Q15 4Q15

MAY reported an uptick in NPL ratio attributable to specific accoounts in Labuan, Greater China and HK.

CET1, TierCET1, TierCET1, TierCET1, Tier----1 C1 C1 C1 CAR and total CAR (as at Dec 2015AR and total CAR (as at Dec 2015AR and total CAR (as at Dec 2015AR and total CAR (as at Dec 2015) ) ) )

16.2%

14.3% 1

7.1%

15.8%

16.2%

17.7%

15.5%

15.4%

12.1%

11.9%

11.3%

12.7%

14.4%

14.5%

12.0%

12.0%

10.8%

11.9%

11.3%

11.5%

13.3%

12.8%

10.9%

11.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


Total CAR Tier 1 CAR CET1 CAR

Total CAR Total CAR Total CAR Total CAR –––– remains strongremains strongremains strongremains strong 15.7%

13.6%

12.9%

14.5%

14.7%

16.2%

15.8%

14.5%

14.8%

15.8%

13.6%

13.0% 14.9%

13.6% 15.3%

15.2%

14.1%

14.4%

16.1%

13.4%

13.0%

13.4%

14.3%

15.8%

15.4%

15.9%

14.6%

15.6%

13.5%

13.6%

13.4%

13.7%

15.0%

14.8%

15.7%

14.4%16.2%

14.3%

17.1%

15.8%

16.2%

17.7%

15.5%

15.4%

16.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


RWCAR

4Q14 1Q15 2Q15 3Q15 4Q15


Industry Focus

Malaysian Banks

Malaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (q----oooo----q and yq and yq and yq and y----oooo----y comparison) y comparison) y comparison) y comparison)

Alliance Financial GroupAlliance Financial GroupAlliance Financial GroupAlliance Financial Group AMMBAMMBAMMBAMMB CIMBCIMBCIMBCIMB RMmRMmRMmRMm 3QFY163QFY163QFY163QFY16 3QFY153QFY153QFY153QFY15 2QFY162QFY162QFY162QFY16 yyyy----oooo----y y y y qqqq----oooo----q q q q 3QFY163QFY163QFY163QFY16 3QFY153QFY153QFY153QFY15 2QFY162QFY162QFY162QFY16 yyyy----oooo----y y y y qqqq----oooo----q q q q 4QFY154QFY154QFY154QFY15 4QFY144QFY144QFY144QFY14 3QFY153QFY153QFY153QFY15 yyyy----oooo----y y y y qqqq----oooo----q q q q Net interest income 216 214 213 1% 1% 395 487 432 -19% -9% 2,461 2,242 2,416 10% 2% Islamic banking income 63 58 61 8% 4% 208 207 200 1% 4% 417 377 386 10% 8% Non-interest income 82 78 92 5% -10% 295 312 299 -5% -1% 1,167 976 1,038 20% 12% Operating incomeOperating incomeOperating incomeOperating income 361361361361 350350350350 366366366366 3%3%3%3% ----1%1%1%1% 898898898898 1,0061,0061,0061,006 931931931931 ----11%11%11%11% ----4%4%4%4% 4,0454,0454,0454,045 3,5953,5953,5953,595 3,8403,8403,8403,840 13%13%13%13% 5%5%5%5% Operating expenses (175) (156) (166) 12% 5% (567) (496) (500) 14% 13% (2,211) (2,239) (2,261) -1% -2% PrePrePrePre----provision profitprovision profitprovision profitprovision profit 186186186186 193193193193 200200200200 ----4%4%4%4% ----7%7%7%7% 331331331331 510510510510 432432432432 ----35%35%35%35% ----23%23%23%23% 1,8331,8331,8331,833 1,3561,3561,3561,356 1,5801,5801,5801,580 35%35%35%35% 16%16%16%16% Provisions & Impairments (5) (25) (19) -76% 81 83 66 nm nm (717) (1,067) (529) nm 36% Associates nm nm (5) 5 4 -199% -241% 19 19 24 0% nm Pre-tax profit 182 168 181 8% 1% 406 589 501 -31% -19% 1,132 385 1,075 194% 5% Net profitNet profitNet profitNet profit 136136136136 126126126126 135135135135 7%7%7%7% 1%1%1%1% 300300300300 417417417417 383383383383 ----28%28%28%28% ----22%22%22%22% 826826826826 200200200200 804804804804 312%312%312%312% 3%3%3%3% NIM (%) 2.18 2.23 2.19 (0.05) (0.01) 2.02 2.42 2.15 (0.40) (0.13) 2.70 2.82 2.68 (0.12) 0.02 Cost-to-income (%) 48.4 44.7 45.4 3.7 3.1 63.1 49.3 53.7 13.8 9.5 54.7 62.3 58.86 (7.6) (4.2) ROE (%) 11.7 11.6 11.8 0.0 (0.1) 8.1 12.0 10.3 (3.9) (2.2) 8.18 2.16 8.2 6.0 (0.0) ROA (%) 1.0 1.0 1.0 0.0 (0.0) 0.9 1.3 1.2 (0.4) (0.3) 0.7 0.2 0.7 0.5 0.0 Gross NPL ratio (%) 1.1 1.1 1.2 (0.1) (0.1) 1.8 1.9 2.0 (0.1) (0.2) 3.0 3.1 3.4 (0.0) (0.4) Loan loss coverage (%) 93.0 94.2 85.5 (1.2) 7.5 94.8 106.0 92.6 (11.2) 2.2 84.7 82.7 76.6 2.0 8.1 LD ratio (%) 88.0 85.1 85.4 2.8 2.6 94.0 95.3 95.5 (1.3) (1.5) 91.5 91.5 93.3 (0.0) (1.9) CET-1(%) 11.3 10.9 11.7 0.4 (0.4) 10.8 10.0 10.6 0.8 0.2 11.5 10.1 9.3 1.4 2.2 Tier-1 CAR (%) 11.3 10.9 11.7 0.4 (0.4) 12.1 11.5 11.8 0.6 0.3 12.7 11.3 10.6 1.4 2.1 RWCAR (%) 17.1 12.9 13.6 4.2 3.5 16.2 15.7 15.6 0.5 0.6 15.8 14.5 13.4 1.3 2.4 Net loans 38,297 35,289 37,607 9% 2% 85,393 85,732 85,270 0% 0% 290,296 258,015 290,109 13% 0% Deposits 43,540 41,453 44,055 5% -1% 90,882 89,993 89,280 1% 2% 317,424 282,069 310,810 13% 2% Gross NPLs/Impaired Loans 418 406 463 3% -10% 1,563 1,649 1,697 -5% -8% 9,082 8,183 10,172 11% -11% PositivesPositivesPositivesPositives NA Growth in deposit. Improvement in NPL ratio. Higher capital

ratios Lower NPL ratio. Improvement in capital ratios. Decent non-interest income growth.

DisappointmentsDisappointmentsDisappointmentsDisappointments NA Higher expenses (regulatory penalty). Steep NIM compression. Low loan growth.

Provisions remain elevated. Negligible growth in loans.

ProspectsProspectsProspectsProspects NA NIM may still face compression in the coming quarter on ongoing portfolio rebalancing. NPL ratio should stay below 2%. Its cost-to-income ratio is targeted at below 58%, while ROE could slide to 9% (FY15: 14%).

NIM is still expected to compress largely from deposit cost pressures across the region except Singapore ad Thailand. Loans are expected to grow at 10, credit costs are expected to stay high and would largely arise from its Malaysian portfolio. CIMB expects its Indonesian credit cost to moderate in FY16.

Source: Company announcements, DBS Bank, AllianceDBS

Industry Focus

Malaysian Banks

MalaysMalaysMalaysMalaysian Banks: 4QCY15 results (qian Banks: 4QCY15 results (qian Banks: 4QCY15 results (qian Banks: 4QCY15 results (q----oooo----q and yq and yq and yq and y----oooo----y comparison) (cont’d)y comparison) (cont’d)y comparison) (cont’d)y comparison) (cont’d)

Hong Leong BankHong Leong BankHong Leong BankHong Leong Bank MaybankMaybankMaybankMaybank Public BankPublic BankPublic BankPublic Bank RMmRMmRMmRMm 2QFY162QFY162QFY162QFY16 2QFY152QFY152QFY152QFY15 1QFY161QFY161QFY161QFY16 yyyy----oooo----yyyy qqqq----oooo----qqqq 4QFY154QFY154QFY154QFY15 4QFY144QFY144QFY144QFY14 3QFY153QFY153QFY153QFY15 yyyy----oooo----yyyy qqqq----oooo----qqqq 4QFY154QFY154QFY154QFY15 4QFY144QFY144QFY144QFY14 3QFY153QFY153QFY153QFY15 yyyy----oooo----yyyy qqqq----oooo----qqqq Net interest income 678 711 660 -5% 3% 2,932 2,442 2,897 20% 1% 1,654 1,555 1,629 6% 2% Islamic banking income 118 106 115 11% 3% 954 806 1,085 18% -12% 204 206 211 -1% -3% Non-interest income 278 206 249 35% 12% 1,728 1,831 1,766 -6% -2% 638 502 631 27% 1% Operating incomeOperating incomeOperating incomeOperating income 1,0741,0741,0741,074 1,0231,0231,0231,023 1,0231,0231,0231,023 5%5%5%5% 5%5%5%5% 5,65,65,65,615151515 5,0795,0795,0795,079 5,7475,7475,7475,747 11%11%11%11% ----2%2%2%2% 2,4972,4972,4972,497 2,2632,2632,2632,263 2,4712,4712,4712,471 10%10%10%10% 1%1%1%1% Operating expenses (658) (463) (463) 42% 42% (2,776) (2,573) (2,601) 8% 7% (749) (635) (741) 18% 1% PrePrePrePre----provision profitprovision profitprovision profitprovision profit 415415415415 560560560560 560560560560 ----26%26%26%26% ----26%26%26%26% 2,8392,8392,8392,839 2,5062,5062,5062,506 3,1463,1463,1463,146 13%13%13%13% ----10%10%10%10% 1,7481,7481,7481,748 1,6271,6271,6271,627 1,7301,7301,7301,730 7%7%7%7% 1%1%1%1% Provisions (58) 56 (21) -204% nm (522) (119) (797) nm -35% 106 (63) (117) -269% -191% Associates 68 91 85 -25% -20% 59 45 34 nm 72% 4 3 1 nm nm Pre-tax profit 426 707 625 -40% -32% 2,376 2,431 2,383 -2% 0% 1,858 1,567 1,614 19% 15% Net profitNet profitNet profitNet profit 344344344344 552552552552 503503503503 ----38%38%38%38% ----32%32%32%32% 1,6521,6521,6521,652 1,9311,9311,9311,931 1,8991,8991,8991,899 ----14%14%14%14% ----13%13%13%13% 1,4921,4921,4921,492 1,2541,2541,2541,254 1,2011,2011,2011,201 19%19%19%19% 24%24%24%24% NIM (%) 1.81 1.95 1.78 (0.13) 0.03 2.41 2.17 2.54 0.24 (0.14) 2.16 2.18 2.13 (0.02) 0.03 Cost-to-income (%) 61.3 45.3 45.2 16.0 16.1 49.4 50.7 45.3 (1.2) 4.2 30.0 28.1 30.0 1.9 0.0 ROE (%) 7.2 14.5 11.6 (7.3) (4.4) 10.9 15.0 13.1 (4.1) (2.2) 19.6 18.3 16.3 1.3 3.3 ROA (%) 0.7 1.2 1.1 (0.5) (0.3) 0.9 1.2 1.1 (0.3) (0.2) 1.6 1.5 1.3 0.2 0.3 Gross NPL ratio (%) 0.9 1.0 0.8 (0.1) 0.0 1.9 1.5 1.5 0.3 0.3 0.5 0.6 0.5 (0.1) (0.0) Loan loss coverage (%) 125.5 129.7 131.0 (4.2) (5.5) 72.0 95.6 85.4 (23.6) (13.4) 120.8 122.4 130.8 (1.6) (10.0) LD ratio (%) 80.6 80.3 80.1 0.4 0.5 94.8 91.8 96.0 3.0 (1.2) 90.3 88.0 89.8 2.3 0.4 CET-1 (%) 13.3 10.8 10.5 2.5 2.8 12.8 11.7 11.2 1.0 1.6 10.9 10.8 10.2 0.1 0.7 Tier-1 CAR (%) 14.4 12.2 11.6 2.2 2.8 14.5 13.5 12.8 0.9 1.7 12.0 12.2 11.4 (0.2) 0.7 RWCAR (%) 16.2 14.7 13.7 1.5 2.5 17.7 16.2 15.0 1.5 2.7 15.5 15.8 14.8 (0.4) 0.7 Net loans 116,611 105,942 115,063 10% 1% 453,493 403,513 458,464 12% -1% 271,814 243,222 266,194 12% 2% Deposits 144,607 132,008 143,566 10% 1% 478,151 439,569 477,493 9% 0% 301,157 276,540 296,339 9% 2% Gross NPLs/Impaired Loans 1,013 1,052 967 -4% 5% 8,555 6,234 7,167 37% 19% 1,352 1,489 1,418 -9% -5% PositivesPositivesPositivesPositives Strong loan growth. Slight NIM uptick. Stronger capital

ratios. Strong non-interest income growth. Lower provisions, saved by writebacks. Above industry loan and deposit growth. Resilient asset

quality trends. Cost-to-income ratio remained best in class.

DisappointmentsDisappointmentsDisappointmentsDisappointments Higher provisions. Weaker associate contributions. Increase in NPL due to specific accounts in Labuan, Greater China and Hong Kong. Loan loss coverage at a new low. Lower dividends.

Lower Islamic banking income

PPPProspectsrospectsrospectsrospects FY16F loan growth is still targeted at 8-9%, with loan-to-deposit ratio at 80-82%. NIMs should fall within 1.9-2.0% while non-interest income is targeted at >23% of total income. Cost-to-income ratio is guided at 42-44%. Credit costs are guided at 25-35bps. FY16F ROE target is guided at c.11%.

Slower loan growth of 8-9% (Malaysia 6-7%, Singapore 3-4%, Indonesia 11-13%), and slower deposit growth of 10-11%. ROE is also guided to be lower at 11-12%. NIM would likely edge lower on stiff deposit competition while credit costs are likely to remain elevated at current levels.

8-9% loan growth, 7-8% deposit growth, NIM to still remain under pressure and expecting up to 8bps contraction, cost-to-income to stay below 33%, credit cost of 15-20bps, >15% ROE and >13% Total CAR. Dividends are expected to remain stable and payout ratios should be close to that declared in FY15.


Industry Focus

Malaysian Banks

Malaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (qMalaysian Banks: 4QCY15 results (q----oooo----q and yq and yq and yq and y----oooo----y comparison) (cont’d)y comparison) (cont’d)y comparison) (cont’d)y comparison) (cont’d)

RHB CapiRHB CapiRHB CapiRHB Capitaltaltaltal Affin HoldingsAffin HoldingsAffin HoldingsAffin Holdings Banks under coverage Banks under coverage Banks under coverage Banks under coverage ---- CumulativeCumulativeCumulativeCumulative RMmRMmRMmRMm 4QFY154QFY154QFY154QFY15 4QFY144QFY144QFY144QFY14 3QFY153QFY153QFY153QFY15 yyyy----oooo----yyyy qqqq----oooo----qqqq 4QFY154QFY154QFY154QFY15 4QFY144QFY144QFY144QFY14 3QFY153QFY153QFY153QFY15 yyyy----oooo----yyyy qqqq----oooo----qqqq 4QCY154QCY154QCY154QCY15 4QCY144QCY144QCY144QCY14 3QCY153QCY153QCY153QCY15 yyyy----oooo----yyyy qqqq----oooo----qqqq Net interest income 872 806 844 8% 3% 241 247 248 -2% -3% 9,450 8,704 9,338 9% 1% Islamic banking income 237 201 223 18% 6% 65 68 63 -5% 3% 2,266 2,028 2,343 12% -3% Non-interest income 573 671 448 -14% 28% 159 162 149 -2% 7% 4,920 4,737 4,671 4% 5% Operating incomeOperating incomeOperating incomeOperating income 1,6821,6821,6821,682 1,6771,6771,6771,677 1,5141,5141,5141,514 0%0%0%0% 11%11%11%11% 465465465465 477477477477 460460460460 ----3%3%3%3% 1%1%1%1% 16,63616,63616,63616,636 15,46915,46915,46915,469 16,35216,35216,35216,352 8%8%8%8% 2%2%2%2% Operating expenses (962) (987) (1,169) -3% -18% (280) (244) (275) 15% 2% (8,378) (7,794) (8,175) 7% 2% PrePrePrePre----provision profitprovision profitprovision profitprovision profit 720720720720 690690690690 345345345345 4%4%4%4% 109%109%109%109% 184184184184 233233233233 185185185185 ----21%21%21%21% 0%0%0%0% 8,2588,2588,2588,258 7,6757,6757,6757,675 8,1778,1778,1778,177 8%8%8%8% 1%1%1%1% Provisions (245) (46) (51) 429% nm (21) 51 (30) nm nm (1,381) (1,131) (1,498) 22% -8% Associates 0 0 0 nm nm (10) 14 4 -176% nm 135 177 152 -24% -11% Pre-tax profit 475 644 294 -26% 61% 143 288 149 -50% -4% 6,998 6,779 6,821 3% 3% Net profitNet profitNet profitNet profit 316316316316 486486486486 194194194194 ----35%35%35%35% 63%63%63%63% 97979797 209209209209 102102102102 ----53%53%53%53% ----5%5%5%5% 5,1645,1645,1645,164 5,1755,1755,1755,175 5,2215,2215,2215,221 0%0%0%0% ----1%1%1%1% NIM (%) 2.12 2.03 2.07 0.09 0.1 2.04 2.09 2.10 (0.05) (0.07) 2.18 2.24 2.20 (0.06) (0.03) Cost-to-income (%) 57.2 58.9 77.2 (1.7) (20.1) 60.3 51.1 59.7 9.2 0.6 53.1 48.8 51.9 4.3 1.1 ROE (%) 5.8 10.5 3.8 (4.7) 2.0 4.8 10.4 5.1 (5.7) (0.3) 9.5 11.8 10.0 (2.3) (0.5) ROA (%) 0.6 0.9 0.3 (0.4) 0.2 0.6 1.3 0.6 (0.7) (0.0) 0.9 1.1 0.9 (0.2) (0.0) Gross NPL ratio (%) 1.9 2.0 1.9 (0.2) (0.1) 1.9 1.8 2.2 0.1 (0.3) 1.6 1.6 1.7 (0.0) (0.1) Loan loss coverage (%) 62.8 61.1 56.5 1.7 6.3 64.0 75.6 61.2 (11.5) 2.8 89.7 95.9 89.9 (6.2) (0.2) LD ratio (%) 94.6 89.5 93.0 5.1 1.6 85.7 80.0 90.2 5.7 (4.4) 89.9 87.7 90.4 2.3 (0.5) CET-1(%) 11.6 11.1 11.9 0.5 (0.3) 11.9 12.3 12.2 (0.4) (0.3) 11.8 11.0 11.0 0.8 0.8 Tier-1 CAR (%) 12.0 11.6 12.3 0.4 (0.3) 11.9 12.3 12.2 (0.4) (0.3) 12.6 11.9 11.8 0.7 0.8 RWCAR (%) 15.4 14.5 15.7 0.8 (0.3) 14.3 13.6 13.5 0.8 0.8 16.0 14.8 14.4 1.3 1.6 Net loans 149,591 140,693 147,879 6% 1% 43,345 40,492 41,817 7% 4% 1,448,839 1,312,897 1,442,402 10% 0% Deposits 158,151 157,134 158,968 1% -1% 50,549 50,604 46,362 0% 9% 1,584,460 1,469,371 1,566,872 8% 1% Gross NPLs/Impaired Loans 2,841 2,892 2,907 -2% -2% 834 748 937 12% -11% 25,659 22,652 25,727 13% 0% PositivesPositivesPositivesPositives NIM uptick. Lower operating expenses ex MSS cost. Strong loan and deposit growth. Lower NPL ratio.

DisappointmentsDisappointmentsDisappointmentsDisappointments Slight contraction in deposit. Full year non-interest income disappointed. Higher provisions

Weak contribution from joint venture (dipped to losses). Lower NIM.

ProspectsProspectsProspectsProspects Loan growth is expected at 8%. NIM will still be a little pressured. Credit cost should inch closer to 40bps but NPL ratio should stay below 2%.Cost-to-income ratio is targeted at below 53%. ROE is targeted at 10%. Lastly, overseas profit contribution is targeted at 10%.

Affin missed all its FY15 KPIs which include ROE, ROA, gross NPL ratio and EPS of 8%/0.9%/1.64%/33sen vs actual results of 4.6%/0.6%/1.90%/19sen. Despite a washout year in FY15, we expect earnings momentum to remain subdued as provisions are expected to remain high.


Industry Focus

Malaysian Banks

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUYSTRONG BUYSTRONG BUYSTRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY BUY BUY BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLDHOLDHOLDHOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUEDFULLY VALUEDFULLY VALUEDFULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL SELL SELL SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER This report is preparedThis report is preparedThis report is preparedThis report is prepared by by by by DBS Bank LtdDBS Bank LtdDBS Bank LtdDBS Bank Ltd This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

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Industry Focus

Malaysian Banks

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This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

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DBS Bank LtdDBS Bank LtdDBS Bank LtdDBS Bank Ltd

12 Marina Boulevard, Marina Bay Financial Centre Tower 3

Singapore 018982

Tel. 65-6878 8888

Company Regn. No. 196800306E

malaysia industry focus malaysian banks...rhbc 4qfy15 below below yes ( ) 7.007.10 hlfg 2qfy16...

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