Malaysian banks' earnings seen as resilient

Malaysia's banking sector will experience resilient earnings in line with the country’s sturdy economic growth supported by strong domestic demand, robust capital markets and exports.

RHB Research Institute Sdn Bhd maintained its bullish outlook on the sector due to key factors such as its expectations of improving economic conditions ahead, robust earnings that remained well-supported by resilient domestic demand, robust capital market activities and benign asset quality.

In addition, decent dividend yields and valuations that were inexpensive, especially relative to the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) proved to be significant contributory factors as well.

With regards to earnings resiliency, RHB Research opined in a report, “Malaysian banks earnings are still very much domestic-centric, where domestic demand is resilient, capital market activities have been robust and asset quality largely benign."

It said that banking stocks generally offer decent yields. 

“We project 2012 to 20113 forecast net dividend yields of 3.8 to 4.2 per cent, which compares well with the FBM KLCI. This, we think, would help provide support to share prices when markets are volatile.”