PP 7767/09/2010(025354)

Malaysia
RHB Research
3 May 2010
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Sector Upda te
3 May 2010
MARKET DATELINE

Banking Recom : Overweight

(Maintained)
Mar ‘10 System Data – Underlying Trends Still
Positive

Table 1. Sector Comparison

Bank Price FV PER (x) CAGR P/Book (x) ROE (%)
(RM/s) (RM/s) Rec CY08 CY09 CY10 (%) CY08 CY09 CY10 FY08 FY09 FY10
Public Bank - F 12.02 13.12 OP 15.6 16.0 14.0 10.6 4.2 3.7 3.2 27.3 24.5 24.2
Public Bank - L 12.00 13.12 OP 15.6 16.0 14.0 10.6 4.2 3.6 3.2 27.3 24.5 24.2
Maybank 7.66 8.96 OP 17.4 16.8 13.7 21.7 2.2 1.9 1.9 9.9 12.1 12.8
CIMB Group 14.18 16.24 OP 26.0 18.1 15.0 18.1 3.0 2.5 2.3 11.9 15.0 16.1
AMMB 4.97 6.13 OP 15.7 13.1 11.1 13.7 1.6 1.4 1.2 11.6 11.8 12.1
EON Capital 7.07 8.07 OP 36.6 14.4 13.1 11.2 1.5 1.4 1.3 4.2 10.1 10.0
AFG 3.13 3.27 OP 18.2 19.2 14.3 21.5 1.8 1.7 1.5 16.8 8.6 9.1
Affin Holdings 3.01 3.03 MP 14.8 11.7 10.6 8.4 1.0 0.9 0.9 6.8 8.1 8.6
Hong Leong Bank 8.70 9.05 MP 16.7 15.3 15.4 1.5 2.5 2.3 2.1 16.7 14.8 13.4
RHB Capital * 6.18 NR NR 12.7 11.1 10.6 7.8 1.7 1.5 1.4 13.3 12.3 13.0
Sector Wt. Avg. ^ 17.6 15.4 12.9 2.4 2.0 1.9 13.2 13.0 13.3
Sector Wt. Avg. (Ex-Maybank) 17.0 14.3 12.6 2.3 2.0 1.9 15.5 15.0 15.2
Sector Wt. Avg. (Ex-Maybank & PBB) 17.7 13.7 12.1 2.0 1.7 1.6 11.6 11.5 11.8
Source : RHB Research Institute, I/B/E/S Estimates * Not under our coverage

♦ Mar ‘10 loans growth still resilient. According to BNM’s statistics, Mar Chart 1. Industry NPL
(%)

’10 loans growth stood at +9.8% yoy (Feb ’10: +10% yoy). This growth
(RMm) Gross NPL (LHS) Gross NPL ratio (RHS) Net NPL ratio (RHS)
1
69,000

was led by the household segment, where the yoy growth rate 64,000 1

accelerated further to +11.8% (Feb ’10: +11.2% yoy). As for the 59,000 1

business segment (Mar ‘10: +4.7% yoy vs. Feb ’10: +4.2% yoy),
54,000
1

disbursements were broad-based but used mainly to fund working capital

49,000
9

44,000

requirements. The SMEs sub-segment saw a slight pick-up in loans 39,000

7

outstanding of +3.2% yoy (Feb ’10: +2.1% yoy). 34,000

5

♦
3
29,000

Leading indicators still strong despite BNM normalising interest 24,000 1

rate. Both total applications and approvals rose by 61% and 35.9% Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09

respectively mom. While the mom growth could be due to the shorter Chart 2. Industry LLC
(%)
working month of Feb, we note that Mar’s leading indicators are also 95

higher than Jan ’10. On the whole, this helps lend support to our view
90

85

that, barring the global economy suffering a double dip, the gradual 80

75

normalisation of interest rate is unlikely to impact loan growth. We are 70

65
thus, maintaining our 2010 loan growth projection of +9% for now. 60
55

♦ Asset quality improved sharply for second consecutive month.

50

45

Gross and net NPL ratios, LLC and absolute NPLs all improved mom. This 40

35

appears in line with our earlier-mentioned belief that while the industry 9
9
-
n
0
0
-
n
1
0
-
n
2
0
-
n
3
0
-
n
4
0
-
n
5
0
-
n
6
0
-
n
7
0
-
n
8
0
-
n
9
0
-
n
0
1
-
n
a a a a a a a a a a a a
could remain under stress from the festive season, asset quality would
J J J J J J J J J J J J

resume its improving trend from Mar/Apr 2010 onwards.

♦ ALR and spread lower. ALR was up but and spread fell, which is largely
a reflection of interbank rates being re-priced faster than ALR.
Nevertheless, this is mainly a timing difference and we expect both ALR
and spread to rise ahead as asset repricing catches up.

♦ LD ratio decreased slightly as yoy loan growth accelerated while yoy

deposit growth decelerated. Overall, liquidity is still ample.

♦ Investment case. We continue to believe that the sector will take the
lead in taking the market to higher grounds. This will be underpinned by
the above mentioned factors. Moreover, most banks have their unique
story to sustain investors’ interests. Thus, we are maintaining our
Overweight rating on the sector. Top pick is Maybank. For exposure to David Chong, CFA
big cap and highly liquid stocks, we also like CIMB, AMMB and Public (603) 9280 2186
Bank. AFG and EON Cap are also rated as Outperform while Affin and HL david.chong@rhb.com.my
Bank are Market Perform.

Please read important disclosures at the end of this report.

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 3 May 2010

Industry Loan Growth And Leading Indicators Still Positive

♦ Mar ‘10 loan growth still resilient. According to BNM’s statistics, Mar ’10 loan growth stood at +9.8% yoy vs.
+10% yoy in Feb ‘10. This growth was led by the household segment, where the yoy growth rate accelerated
further to +11.8% (vs. Feb ’10: +11.2% yoy). Key areas for this segment were loans to purchase both
residential and non-residential property, passenger cars and personal use. As for the business segment (Mar
‘10: +4.7% yoy vs. Feb ’10: +4.2% yoy), disbursements were broad-based but used mainly to fund working
capital requirements. The SMEs sub-segment saw a slight pick-up in loans outstanding of +3.2% yoy (Feb ’10:
+2.1% yoy). MoM basis, loan growth decelerated to +0.5% mom vs. +1.5% mom in Feb ’10. Nevertheless, this
was the tenth consecutive month that mom growth was in positive territory.

Chart 3 : Annual Loan Growth Chart 4 : Loan Growth Breakdown

(RMbn) Loan (RMbn - LHS) Loan Growth (% yoy - RHS) (%) (%) Business Household
800 18
12 16
750

14
700
10
12
650
8 10
600
8
550 6
6
500
4
4
450
2
400 2 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2006 2007 2008 2009 2010

Source: BNM Source: BNM

Chart 5 : Total Loans & Growth (Residential Property) Chart 6 : Total Loans & Growth (Non-Residential Property)
(RMbn) (%) (RMbn) (%)
Residential property (LHS) % yoy (RHS) Non-residential property (LHS) % yoy (RHS) 23
11 75
210 22
70 21
200 10 20
65
19
190 18
60
9 17
180
55 16
15
170 50
8 14

160 13
45
12
150 7 40 11
Apr 2006 2007 2008 2009 2010 Apr 2006 2007 2008 2009 2010

Source: BNM Source: BNM

Chart 7 : Total Loans & Growth (Transport Vehicles) Chart 8 : Total Loans & Growth (Personal Use)
(RMbn) (%) (RMbn) Personal use (LHS) % yoy (RHS) (%)
Transport vehicles (LHS) % yoy (RHS)
10 38 22

36 20
120 9
34
18
8
115 32
16
7 30
110 14
28
6
12
105 26
5 10
24
100
4 22 8

95 3 20 6
Apr 2006 2007 2008 2009 2010
Apr 2006 2007 2008 2009 2010

Source: BNM Source: BNM

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Chart 9 : Total Loans & Growth (Working Capital) Chart 10 : Total Loans & Growth (Others)
(RMbn) Working capital (LHS) % yoy (RHS) (%) (RMbn) (%)
Others (LHS) % yoy (RHS) 60
210 16
50
40
14
40
200 12
30
35
10 20
190
8 10
6 30
0
180
4 -10
2 25 -20
170
0 -30

160 -2 20 -40
Apr 2006 2007 2008 2009 2010 Apr 2006 2007 2008 2009 2010

Source: BNM Source: BNM

♦ Mar ‘10 loan applications back up again mom following shorter working period in Feb … Following the
shorter working month of Feb, Mar ’10 loan applications in absolute terms increased to RM51.9bn (+23% yoy)
from RM32.2bn (-5% yoy). Loan applications from households expanded by 38.7% yoy, which, according to
BNM, reflects higher demand for loans to purchase residential and non-residential property as well as passenger
cars. Demand for loans from the business sector was also stronger (+16.7% yoy) with higher applications
registered across all major economic sectors. Notably, the SMEs sub-segment also saw loan applications pick-up
(Mar ’10: +38.7% yoy; Feb ’10: +13% yoy). The 3-month moving average loan application growth was largely
stable at +20.4% yoy as compared to +22.8% yoy in Feb ’10.

Chart 11 : Industry Loan Applications* Chart 12 : Industry Loan Applications Breakdown

(RMbn) 3-mth moving average (RMbn - LHS) % yoy (RHS) (%) (%) yoy
55 80 150 Business
Zero %
50
60 Household

45 100

40
40

50
35 20

30
0
0
25

-20
20
-50
15 -40 2005 2006 2007 2008 2009 2010
2005 2006 2007 2008 2009 2010

*Based on 3-month moving average

Source: BNM
Source: BNM

♦ … and similarly reflected in loan approvals. Similarly, absolute amount of approvals in Mar ‘10 rose mom to
RM26.9bn (+12.6% yoy) vs. RM19.8bn (+11.8% yoy) in Feb ’10. The household segment was the main driver,
registering higher growth of +20.1 yoy (Feb ‘10: +15.4% yoy). Loan approvals for the business segment slowed
to +4.1% yoy (vs. Feb ’10: +7.4% yoy) but as noted above, loan approvals for the SMEs sub-segment
accelerated to +45.5% yoy (Feb ’10: +3.6% yoy). Overall, the 3-month absolute moving average loan
approvals were flattish mom while yoy growth slowed to +20.6% yoy (Feb ’10: +28.2% yoy).

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Chart 13 : Industry Loan Approvals* Chart 14 : Industry Loan Approvals Breakdown

(RMbn) (%) (%) yoy
3-mth moving average (RMbn - LHS) % yoy (RHS) Business
31 80
180
Zero %
29 70
Household
27 60
130
50
25
40
23
80
30
21
20
19
10 30
17
0
15
-10 -20
13 -20
11 -30 -70
9 -40 2005 2006 2007 2008 2009 2010
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

*Based on 3-month moving average

Source: BNM
Source: BNM

♦ Leading indicators still strong despite BNM normalising interest rate. Mar’s statistics suggest that BNM’s
move to normalise interest rate by raising its Overnight Policy Rate (OPR) by 25bps earlier in Mar has not
dampened demand for loans. While the mom growth noted for both total applications and approvals could be
due to the shorter working month of Feb, we note that Mar’s applications and approvals of RM51.9bn and
RM26.9bn respectively are also higher as compared to Jan ’10 of RM46bn and RM23.4bn respectively. On the
whole, Mar’s leading indicators help lend support to our view that, barring the global economy suffering a double
dip, the gradual normalisation of interest rate is unlikely to impact loan growth. We are thus, maintaining our
2010 loan growth projection of +9% for now.

Industry Asset Quality

♦ Industry asset quality – abosolute NPLs down mom ... Mar ‘10 three-month gross NPLs (in absolute terms)
declined by RM782m or -2.9% mom to RM26.6bn (Feb ’10: +RM1.35bn or +5.2% mom). This appears to be in
line with what we had said earlier, i.e. while the industry could remain under stress from the festive season, we
had expected asset quality to resume its improving trend from Mar/Apr onwards.

♦ … leading to improvements in asset quality ratios. Following from the above, Mar ‘10 system-wide three-
month gross and net non-performing loan (NPL) ratios (post-GP8 adjustment) improved slightly to 3.3% (Feb
‘10: 3.41%) and 1.83% (Feb ‘10: 1.91%) respectively while loan loss coverage (LLC) increased to 95.6% (Feb
‘10: 93.3%). Charts 18 to 24 show the gross NPL (updated quarterly) trends by various purposes. Generally, it
appears that the level of NPLs had remained rather stable qoq (+0.7% qoq). Improvements were noted for the
purchase of residential property (-7.8% qoq) and purchase of passenger cars (-3% qoq), but these were offet by
high NPL formation for construction (+59% qoq) and other purposes (+29.6% qoq).

♦ Impact of FRS139 muted thus far? According to BNM, beginning Jan 2010, loans are reported based on
FRS139. Although adoption by the various banks would still depend on their respective FYE, nevertheless, this
would imply that the NPL numbers reported would have also included impaired loans for banks with FYE 31 Dec
such as Affin, CIMB, EON Cap, Public Bank and RHB Cap. If true, the statistics would appear to suggest that the
impact of FRS139 on NPLs (or impaired loans) has been rather muted thus far. Nevertheless, we would continue
to monitor these numbers closely in the coming months.

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Chart 15 : Industry Asset Quality*

(R M m ) G ro s s N P L (LH S ) G r o s s N P L r a tio ( R H S ) N e t N P L r a tio ( R H S ) (% )
17
6 9 ,0 0 0

6 4 ,0 0 0 15

5 9 ,0 0 0 13

5 4 ,0 0 0
11

4 9 ,0 0 0
9

4 4 ,0 0 0
7
3 9 ,0 0 0

5
3 4 ,0 0 0

3
2 9 ,0 0 0

2 4 ,0 0 0 1
Ju n -9 9 Ju n -0 0 Ju n -0 1 Ju n -0 2 Ju n -0 3 Ju n -0 4 Ju n -0 5 Ju n -0 6 Ju n -0 7 Ju n -0 8 Ju n -0 9

* Reflects 3-month NPL classification method and GP8 adjustment (excluding-IIS) In addition, beginning Jan 2010, loans are reported
based on FRS139. The adoption of FRS139 is based on the FYE of the banks.
Source: BNM

Chart 16 : Industry LLC: Stronger Chart 17 : Industry Absolute Gross NPL & Net NPL Ratio
(%) (RMm) (%)
95 Gross NPL - mom chg (RMm) Net NPL ratio (%)
11
90 2,000
85
80
9
1,000
75
70
65 7
-
60
Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09
Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-08

Jun-09
55
50 (1,000) 5

45
40
(2,000) 3
35
9 0 1 2 3 4 5 6 7 8 9 0
9
- 0
- 0
- 0
- 0
- 0
- 0
- 0
- 0
- 0
- 0
- 1
-
n n n n n n n n n n n n
Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja (3,000) 1

Source: BNM Source: BNM

Chart 18 : Gross NPL Ratio: Property – Residential Chart 19 : Gross NPL Ratio: HP
(RMm) (RMm) (%)
Gross NPL (RMm - LHS) (%)
10 4000
14000 Gross NPL (% - RHS) Gross NPL (RMm - LHS)
Gross NPL (% - RHS) 4.0
9 3500
13000
8
12000 3000
3.0
7
11000
2500
10000 6
2.0

5 2000
9000

8000 4 1500 1.0

6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

Source: BNM Source: BNM

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 3 May 2010

Chart 20 : Gross NPL Ratio: Construction Chart 21 : Gross NPL Ratio: Property – Non-Residential
(RMm) (%) (RMm) (%)
Gross NPL (RMm - LHS) 21 4800 Gross NPL (RMm - LHS) 12
3300 Gross NPL (% - RHS) 11
Gross NPL (% - RHS) 19 4300
10
17 9
2800 3800
8
15
3300 7
2300
13 6
2800
11 5
1800
4
9 2300
3
1300 7 1800 2
6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

Source: BNM Source: BNM

Chart 22 : Gross NPL Ratio: Personal Use Chart 23 : Gross NPL Ratio: Credit Card
(RMm) (%) (RMm) (%)
Gross NPL (RMm - LHS)
9 800 4.0
1900 Gross NPL (% - RHS)

1800 8 750 Gross NPL (RMm - LHS)

3.5
1700 Gross NPL (% - RHS)
7 700
1600
1500 6 650 3.0
1400
5 600
1300
2.5
1200 550
4
1100
500 2.0
1000 3
6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0
6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

Source: BNM Source: BNM

Chart 24 : Gross NPL Ratio: Working Capital

(RMm) (%)
16000 10
Gross NPL (RMm - LHS)

15000 Gross NPL (% - RHS)

9

14000
8
13000
7
12000

6
11000

10000 5
2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

Source: BNM

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Industry Deposit Growth And LD Ratio

♦ Mar ‘10 deposit growth decelerated but second consecutive months of expansion. Mar ‘10 deposits
expanded by RM20bn mom (Feb ‘10: -RM10bn mom), which mainly came from both banking and non-bank
financial institutions, businesses and individuals. The bulk of the deposits were placed in short-term money
market deposits (potentially to take advantage of the rate hike), NIDs and FX deposits.

♦ LD ratio deteriorated slightly but liquidity still ample. Given that yoy loan growth outpaced deposit growth,
Mar ‘10 loan-deposit (LD) ratio decreased to 75.4% (Feb ‘10: 76.5%). Nevertheless, the sideways trend
suggests that the system’s liquidity remains ample.

Chart 25 : Annual Deposit Growth Chart 26 : LD Ratio

(RMbn) Deposit (RMbn - LHS) Deposits Growth (% yoy - RHS) (%) 105%
25

1000
100%
20
900
95%

800 15
90%

700
85%
10

600
80%

5
500
75%

400 0
70%
2002 2003 2004 2005 2006 2007 2008 2009 2010
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: BNM Source: BNM

Industry Average Lending Rate (ALR)

♦ ALR up but interest spread down following OPR increase. Commercial banks’ ALR in Mar ‘10 rose by 10bps
to 4.95% (vs. 4.85% in Feb ‘10) but interest spread narrowed by 16bps to 2.45% (Feb ‘10: 2.61%). The
squeeze in spread is largely a reflection of interbank rates being repriced faster than ALR (3-month rate +26bps
mom vs. ALR: +10bps mom). Nevertheless, this is mainly a timing difference and we expect both ALR and
spread to rise ahead as asset repricing catches up.

Chart 27: Industry ALR & Spread Chart 28 : Industry Capital Ratios
(%) (%) (%) (%)
7.5 Avg. Lending Rate (LHS) Interest Spreads (RHS) 4.5
15.0 RWCAR (LHS) Core capital ratio (RHS) 13.5

14.5 13.0
7.0 12.5
4.0
14.0
12.0
6.5 13.5 11.5
3.5 11.0
13.0
6.0 10.5
12.5
10.0
3.0
12.0 9.5
5.5
11.5 9.0
2.5 8.5
5.0 11.0
8.0
10.5 7.5
4.5 2.0
10.0 7.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
92 98 99 00 01 02 03 04 05 06 07 08 09 10

Source: BNM Source: BNM

Industry Capital Ratios

♦ Capital ratios broadly stable. Core capital ratio declined slightly to 13.2% (Feb ‘10: 13.5%) while RWCAR was
also slightly lower at 14.9% (Feb ‘10: 15.1%). Capital base was slightly lower following dividend payouts by a
few banks.

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RISKS

♦ The risks include: 1) slower-than-expected loan growth; 2) deterioration in asset quality; and 3) changes in
market conditions that may adversely affect investment portfolio.

CHANGES TO FORECASTS

♦ No changes to our earnings forecasts for the banks.

VALUATIONS AND RECOMMENDATION

♦ Overall, we continue to believe that the sector (being the lynchpin of the economy) will take the lead in taking
the market to higher ground. This will be underpinned by: 1) earnings growth gaining momentum from net
interest income (loan growth, stable to expansion in NIM and growing Islamic income), non-interest income
(from higher transactional income and the revival of the capital markets) and lower LLP (from improving asset
quality); 2) potential M&As would excite the market; 3) more aggressive capital management or higher dividend
given the excess capital positions, barring Basel III; 4) both PER and P/B valuations are still below their recent
peaks; and 5) foreign shareholdings are still relatively low and well below peaks.

♦ Moreover, most banks have their unique story: 1) AFG – organic growth plus absence of impairment on CLOs as
well as potential write back of impairment and LLP; 2) AMMB – ANZ value proposition gradually enhancing
profitability; 3) CIMB Group – growing regional universal bank with strong growth from Indonesia; 4) Maybank –
sharp improvement in earnings post regional acquisitions with ROE returning to pre-acquisition levels but
valuations still well below pre-acquisition levels; and 5) Public Bank – above industry loan growth and asset
quality with relatively higher dividend yield. Thus, we are maintaining our Overweight rating on the sector.
Maybank remains as our top pick due to its relatively cheap valuations vis-à-vis historical levels. For
exposure to big cap and highly liquid stocks, we also like CIMB, AMMB and Public Bank. AFG, EON Cap and
RCE Cap are also rated as Outperform while Affin and HL Bank are Market Perform.

Table 2 : Valuation Bases

Fair Value
Company (RM/share) Valuation Methodology
Affin 3.03 11x CY10 EPS, 5x discount to reflect its low profitability and market capitalisation
AFG 3.27 15x CY10 EPS, 1x discount to reflect relatively lower liquidity and market capitalisation
AMMB 6.13 Benchmark 16x CY10 EPS
CIMB Group 16.24 17x CY10 EPS, 1x premium to benchmark to reflect its growing status as a regional
universal bank and in position to benefit from the current window of opportunities arising
from western banks pulling back their resources in the region
EON Cap 8.07 15x CY10 EPS, 1x discount to benchmark to reflect its relatively small market capitalisation
and lower liquidity
HL Bank 9.05 16x CY10 EPS, 1x discount to benchmark to reflect its relatively lower liquidity
Maybank 8.96 Benchmark 16x FY11 EPS
Public 13.12 Benchmark 16x CY10 EPS
Source: RHBRI

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 3 May 2010

Table 3 : Industry NPLs (including IIS, which is pre-revised GP8 method)

NPLs (3-month recognition) NPLs (6-month recognition)
Month Gross NPLs Net NPLs Gross Ratio Net Ratio Gross NPLs Net NPLs Gross Ratio Net Ratio
(RMm) (RMm) (%) (%) (RMm) (RMm) (%) (%)
Apr-06 53,816 31,407 9.5 5.7 45,304 24,245 8.0 4.4
May-06 53,741 31,092 9.4 5.6 45,211 23,912 7.9 4.3
Jun-06 52,898 30,225 9.1 5.4 44,865 23,409 7.7 4.2
Jul-06 53,483 30,247 9.2 5.4 45,606 23,553 7.8 4.2
Aug-06 53,338 29,617 9.1 5.3 45,818 23,583 7.8 4.2
Sep-06 52,219 28,557 8.9 5.1 44,634 22,542 7.6 4.0
Oct-06 52,010 28,538 8.8 5.0 44,390 22,104 7.5 3.9
Nov-06 51,743 28,110 8.7 4.9 44,510 22,013 7.5 3.9
Dec-06 50,391 27,360 8.5 4.8 43,251 21,364 7.3 3.7
Jan-07 50,276 26,476 8.4 4.6 43,627 20,911 7.3 3.6
Feb-07 50,111 26,824 8.4 4.7 43,103 21,004 7.2 3.6
Mar-07 49,631 25,645 8.3 4.4 42,739 19,598 7.1 3.4
Apr-07 49,303 25,174 8.2 4.3 42,421 19,413 7.0 3.3
May-07 49,086 24,871 8.1 4.3 42,170 19,168 6.9 3.3
Jun-07 46,641 23,969 7.6 4.1 40,143 18,808 6.5 3.2
Jul-07 46,505 23,412 7.4 3.8 40,191 18,366 6.4 3.0
Aug-07 45,583 22,389 7.2 3.6 39,649 17,586 6.2 2.9
Sep-07 44,074 21,676 6.8 3.5 38,373 17,102 5.9 2.7
Oct-07 43,912 21,349 6.8 3.4 38,152 16,634 5.9 2.7
Nov-07 43,288 20,666 6.6 3.3 37,710 16,144 5.8 2.6
Dec-07 41,763 20,011 6.5 3.2 35,968 15,271 5.6 2.4
Jan-08 41,524 19,648 6.4 3.1 35,850 15,078 5.5 2.4
Feb-08 41,751 20,189 6.4 3.2 36,158 15,686 5.5 2.5
Mar-08 40,440 19,028 6.1 3.0 34,946 14,679 5.3 2.3
Apr-08 39,530 18,482 5.9 2.9 34,113 14,248 5.1 2.2
May-08 37,871 18,414 5.6 2.8 32,501 14,379 4.8 2.2
Jun-08 36,977 17,550 5.4 2.6 31,678 13,698 4.6 2.1
Jul-08 36,712 17,091 5.3 2.5 31,639 13,367 4.6 2.0
Aug-08 36,815 17,187 5.2 2.5 31,577 13,211 4.5 1.9
Sep-08 36,059 16,660 5.1 2.4 31,109 13,029 4.4 1.9
Oct-08 36,330 16,878 5.1 2.4 31,161 13,052 4.4 1.9
Nov-08 35,886 16,780 5.0 2.4 30,811 12,812 4.3 1.8
Dec-08 34,983 15,889 4.8 2.2 29,914 11,964 4.1 1.7
Jan-09 34,856 15,811 4.8 2.2 29,828 11,849 4.1 1.7
Feb-09 34,882 15,864 4.8 2.2 29,617 11,664 4.1 1.6
Mar-09 33,592 16,033 4.6 2.2 28,310 11,819 3.9 1.6
Apr-09 33,706 16,076 4.6 2.2 28,457 11,977 3.9 1.7
May-09 33,991 15,934 4.6 2.2 28,570 11,740 3.9 1.6
Jun-09 33,312 15,791 4.5 2.2 28,147 11,792 3.8 1.6
Jul-09 33,180 15,057 4.4 2.1 28,026 11,157 3.7 1.5
Aug-09 33,579 15,541 4.4 2.1 28,413 11,580 3.7 1.6
Sep-09 33,890 15,949 4.4 2.1 28,353 11,693 3.7 1.6
Oct-09 33,488 15,606 4.4 2.1 28,000 11,190 3.6 1.5
Nov-09 29,736 14,538 3.8 1.9 24,345 10,331 3.1 1.4
Dec-09 28,693 13,788 3.7 1.8 23,792 10,057 3.0 1.3
Jan-10* 28,970 13,653 3.7 1.8 - - - -
Feb-10 30,242 15,039 3.8 1.9 - - - -
Mar-10 28,521 14,487 3.5 1.8 - - - -
*Beginning Jan 2010, loans are reported based on FRS139. The adoption of FRS139 is based on the FYE of the banks.
Source : BNM

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Table 4 : Industry NPLs (based on revised GP8 method)

NPLs (3-month recognition) NPLs (6-month recognition)
Month Gross NPLs Net NPLs Gross Ratio Net Ratio Gross NPLs Net NPLs Gross Ratio Net Ratio
(RMm) (RMm) (%) (%) (RMm) (RMm) (%) (%)
Apr-06 46,418.0 31,407.0 8.3 5.7 38,171.0 24,245.0 6.8 4.4
May-06 46,335.0 31,092.0 8.2 5.6 38,057.0 23,912.0 6.7 4.3
Jun-06 45,732.0 30,225.0 8.0 5.4 37,931.0 23,409.0 6.6 4.2
Jul-06 46,212.0 30,247.0 8.0 5.4 38,525.0 23,553.0 6.7 4.2
Aug-06 45,933.0 29,617.0 7.9 5.3 38,594.0 23,583.0 6.7 4.2
Sep-06 44,943.0 28,557.0 7.7 5.1 37,592.0 22,542.0 6.5 4.0
Oct-06 44,810.0 28,538.0 7.7 5.0 37,461.0 22,104.0 6.4 3.9
Nov-06 44,556.0 28,110.0 7.6 4.9 37,555.0 22,013.0 6.4 3.9
Dec-06 43,394.0 27,360.0 7.4 4.8 36,491.0 21,364.0 6.2 3.7
Jan-07 43,212.0 26,476.0 7.3 4.6 36,770.0 20,911.0 6.2 3.6
Feb-07 43,071.0 26,824.0 7.3 4.7 36,312.0 21,004.0 6.1 3.6
Mar-07 42,645.0 25,645.0 7.2 4.4 35,931.0 19,598.0 6.0 3.4
Apr-07 42,325.0 25,174.0 7.1 4.3 35,686.0 19,413.0 6.0 3.3
May-07 42,189.0 24,871.0 7.0 4.3 35,504.0 19,168.0 5.9 3.3
Jun-07 40,200.0 23,969.0 6.6 4.1 33,928.0 18,808.0 5.6 3.2
Jul-07 40,022.0 23,412.0 6.4 3.8 33,937.0 18,366.0 5.4 3.0
Aug-07 39,116.0 22,389.0 6.2 3.6 33,395.0 17,586.0 5.3 2.9
Sep-07 37,980.0 21,676.0 5.9 3.5 32,490.0 17,102.0 5.1 2.7
Oct-07 37,772.0 21,349.0 5.9 3.4 32,210.0 16,634.0 5.0 2.7
Nov-07 37,127.0 20,666.0 5.7 3.3 31,749.0 16,144.0 4.9 2.6
Dec-07 35,732.0 20,011.0 5.6 3.2 30,141.0 15,271.0 4.7 2.4
Jan-08 35,445.0 19,648.0 5.5 3.1 29,977.0 15,078.0 4.6 2.4
Feb-08 35,628.0 20,189.0 5.5 3.2 30,254.0 15,686.0 4.6 2.5
Mar-08 34,722.0 19,028.0 5.3 3.0 29,435.0 14,679.0 4.5 2.3
Apr-08 33,823.3 18,482.3 5.1 2.9 28,735.0 14,248.0 4.4 2.2
May-08 32,497.0 18,414.0 4.9 2.8 27,395.0 14,379.0 4.1 2.2
Jun-08 31,725.0 17,550.0 4.7 2.6 26,674.0 13,698.0 3.9 2.1
Jul-08 31,430.0 17,091.0 4.6 2.5 26,625.0 13,367.0 3.9 2.0
Aug-08 31,436.0 17,187.0 4.5 2.5 26,478.0 13,211.0 3.8 1.9
Sep-08 30,683.0 16,660.0 4.3 2.4 25,994.0 13,029.0 3.7 1.9
Oct-08 30,973.0 16,878.0 4.4 2.4 26,068.0 13,052.0 3.7 1.9
Nov-08 30,611.0 16,780.0 4.3 2.4 25,754.0 12,812.0 3.6 1.8
Dec-08 29,803.0 15,889.0 4.1 2.2 24,954.0 11,964.0 3.5 1.7
Jan-09 29,701.0 15,811.0 4.1 2.2 24,878.0 11,849.0 3.4 1.7
Feb-09 29,717.0 15,864.0 4.1 2.2 24,663.0 11,664.0 3.4 1.6
Mar-09 28,873.0 16,033.0 4.0 2.2 23,796.0 11,819.0 3.3 1.6
Apr-09 28,975.0 16,076.0 4.0 2.2 23,938.0 11,977.0 3.3 1.7
May-09 29,162.0 15,934.0 4.0 2.2 23,932.0 11,740.0 3.3 1.6
Jun-09 28,653.0 15,791.0 3.9 2.2 23,666.0 11,792.0 3.2 1.6
Jul-09 28,510.0 15,057.0 3.8 2.1 23,527.0 11,157.0 3.1 1.5
Aug-09 28,824.0 15,541.0 3.8 2.1 23,841.0 11,580.0 3.2 1.6
Sep-09 29,130.0 15,949.0 3.8 2.1 23,765.0 11,693.0 3.1 1.6
Oct-09 28,786.0 15,606.0 3.8 2.1 23,474.0 11,190.0 3.1 1.5
Nov-09 25,841.0 14,538.0 3.4 1.9 20,627.0 10,331.0 2.7 1.4
Dec-09 24,934.0 13,788.0 3.2 1.8 20,195.0 10,057.0 2.6 1.3
Jan-10* 25,938.0 13,653.0 3.3 1.8 - - - -
Feb-10 27,291.0 15,039.0 3.4 1.9 - - - -
Mar-10 26,509.0 14,487.0 3.3 1.8 - - - -
*Beginning Jan 2010, loans are reported based on FRS139. The adoption of FRS139 is based on the FYE of the banks.
Source : BNM

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Table 5 : Key Earnings Data

Maybank CIMB Grp PBB - L AMMB HLB EONC Affin AFG
Pre-provision Profit (RMm)

FY09a 4,762.4 4,875.1 4,000.0 1,960.7 1,189.5 585.4 669.7 443.8

FY10F 6,276.3 5,862.3 4,465.3 2,172.0 1,205.2 672.5 719.6 611.2
FY11F 6,713.3 6,648.0 4,871.2 2,358.7 1,260.9 728.5 752.2 666.5

Net Profit (RMm)

FY09a 2,180.6 2,806.8 2,517.3 1,010.0 905.3 341.1 371.8 259.3
FY10F 3,634.4 3,373.2 2,872.0 1,202.1 892.7 373.1 411.0 364.3
FY11F 4,292.7 3,976.6 3,211.7 1,377.3 894.2 422.4 442.1 411.6

Net Profit Growth (%)

FY09a -36.1 43.8 -2.5 17.3 22.0 155.0 27.0 13.2
FY10F 66.7 20.2 14.1 19.0 -1.4 9.4 10.5 40.5
FY11F 18.1 17.9 11.8 14.6 0.2 13.2 7.6 13.0

Adjusted Net Interest Margins (%)

FY09a 2.8 3.4 2.4 3.0 2.0 2.6 2.7 2.6
FY10F 2.8 3.4 2.4 2.9 2.0 2.7 2.7 2.5
FY11F 2.8 3.4 2.4 2.9 2.0 2.6 2.6 2.5

Non-Interest Income As % of Total Income

FY09a 30.8 35.1 22.6 31.2 26.0 19.9 23.9 15.0
FY10F 35.3 33.6 22.1 32.4 27.1 20.2 23.6 25.9
FY11F 34.8 33.3 21.7 32.5 26.8 20.5 23.7 26.2

Cost-to-Income Ratio (%)

FY09a 53.9 54.0 34.5 48.0 42.4 58.9 47.4 54.2
FY10F 50.2 50.6 33.4 46.9 43.3 57.4 46.9 47.4
FY11F 50.0 48.7 32.8 46.3 43.4 56.6 47.0 46.5

Loan-to-Deposit Ratio (%)

FY09a 87.4 79.5 79.2 92.0 51.5 92.9 78.7 75.7
FY10F 86.7 76.3 82.1 91.1 50.5 93.1 77.5 78.8
FY11F 86.8 75.9 83.6 90.4 50.5 93.3 76.8 82.0

Loan Growth (%)

FY09a 13.5 20.9 18.8 9.2 0.8 8.3 12.9 10.4
FY10F 8.0 10.4 14.0 7.1 5.0 10.2 8.3 9.3
FY11F 7.0 9.4 10.0 7.1 7.1 9.2 8.1 9.3

Gross NPL Ratio (%)

FY09a 3.5 5.0 1.0 3.3 2.2 3.8 3.7 4.5
FY10F 3.2 4.5 0.9 2.7 2.2 3.3 2.9 4.0
FY11F 3.0 4.0 0.9 2.2 2.1 2.8 2.6 3.5

Net NPL Ratio (%)

FY09a 1.5 1.8 0.8 2.1 1.3 2.3 2.2 2.2
FY10F 1.4 1.6 0.8 1.7 1.3 2.0 1.7 1.9
FY11F 1.3 1.4 0.7 1.4 1.3 1.6 1.6 1.7

Loan Loss Cover (%)

FY09a 112.9 90.8 172.4 83.8 109.1 78.5 81.5 85.8
FY10F 117.0 93.4 181.0 95.1 110.2 85.6 91.9 90.1
FY11F 121.1 96.8 191.6 108.0 112.4 94.5 96.7 95.6

RWCAR (%)
FY09a 15.0 14.4 14.2 15.2 16.5 14.4 13.8 14.4
FY10F 15.6 13.6 14.3 15.4 17.3 14.3 13.3 14.8
FY11F 15.8 13.3 14.3 15.7 17.8 14.2 12.8 15.3
Source : RHBRI – for companies with FYE Mar, FY09, FY10F and FY11F refers to FY10, FY11 and FY12 respectively

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Table 6 : Valuation Summary

Maybank CIMB Grp PBB - L AMMB HLB EONC Affin AFG
Bloomberg Ticker MAY MK CIMB MK PBK MK AMM MK HLBK MK EON MK AHB MK AFG MK
Recommendation OP OP OP OP MP OP MP OP
Share Price (RM/s) @ 30 Apr ‘10 7.66 14.18 12.00 4.97 8.70 7.07 3.01 3.13

EPS (Sen)
FY09a 37.8 79.5 73.3 33.5 57.3 49.2 24.9 16.8
FY10F 51.3 95.5 82.0 39.9 56.5 53.8 27.5 23.5
FY11F 60.7 112.6 91.7 45.7 56.6 60.9 29.6 26.6

EPS Growth (% y-o-y)

FY09a -29.8 37.4 -4.7 7.8 22.0 155.0 27.0 13.2
FY10F 35.7 20.2 11.8 19.0 -1.4 9.4 10.5 40.5
FY11F 18.1 17.9 11.8 14.6 0.2 13.2 7.6 13.0

PER (x)
FY09a 20.2 17.8 16.4 14.8 15.2 14.4 12.1 18.7
FY10F 14.9 14.8 14.6 12.5 15.4 13.1 10.9 13.3
FY11F 12.6 12.6 13.1 10.9 15.4 11.6 10.2 11.8

Book (RM/s)
FY09a 3.5 5.8 3.1 3.1 3.6 5.1 3.2 1.9
FY10F 3.8 6.1 3.6 3.5 4.0 5.6 3.2 2.1
FY11F 4.2 6.8 4.0 3.9 4.4 6.1 3.3 2.3

P / Book (x)
FY09a 2.2 2.5 3.8 1.6 2.4 1.4 0.9 1.6
FY10F 2.0 2.3 3.3 1.4 2.2 1.3 0.9 1.5
FY11F 1.8 2.1 3.0 1.3 2.0 1.2 0.9 1.4

ROE (%)
FY09a 9.9 15.0 24.5 11.8 16.7 10.1 8.1 9.1
FY10F 14.0 16.1 24.2 12.1 14.8 10.0 8.6 11.8
FY11F 15.2 17.4 23.8 12.5 13.4 10.4 9.0 12.0

ROE / PB (x)
FY09a 4.5 6.1 6.4 7.4 7.0 7.3 8.6 5.5
FY10F 7.0 6.9 7.3 8.4 6.8 7.9 9.2 7.9
FY11F 8.3 8.3 8.0 9.7 6.8 9.0 9.9 8.9

ROA (%)
FY09a 0.2 1.3 1.2 1.1 1.2 0.8 1.0 0.8
FY10F 1.1 1.3 1.3 1.2 1.1 0.8 1.0 1.0
FY11F 1.2 1.4 1.3 1.3 1.0 0.8 1.0 1.1

DPS (Sen)
FY09a 8.0 18.5 55.0 10.0 24.0 7.7 8.5 6.3
FY10F 29.0 18.5 60.0 10.0 24.0 10.0 8.5 6.3
FY11F 35.0 18.5 65.0 10.0 24.0 10.0 8.5 6.3

Dividend Yield (%)

FY09a 1.0 1.3 4.6 2.0 2.8 1.1 2.8 2.0
FY10F 3.8 1.3 5.0 2.0 2.8 1.4 2.8 2.0
FY11F 4.6 1.3 5.4 2.0 2.8 1.4 2.8 2.0
Source : RHBRI – for companies with FYE Mar, FY09, FY10F and FY11F refers to FY10, FY11 and FY12 respectively

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law.
The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may
differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not
to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein
in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated
persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or
more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take
on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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securities, subject to the duties of confidentiality, will be made available upon request.

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