COMPARISON OF MAJOR BANK STOCK COUNTERS IN MALAYSIA

Lately all of the major bank counters in Malaysia are in the lower range of price to earning (P/E) ratio and higher range of dividend yield. Meaning that share prices are relatively cheap in comparison to the earning amount. Also, there are a few counters that pay annual dividend of 5% and above, which is considerably higher return that fixed deposit rate (below 3.5%). Now may be a good opportunity to buy in the shares to enjoy a good rate of return.

Below is a comparison of the major banks in Malaysia, in terms of earnings, dividend return and efficiency of the management. Scores are assigned to each indicator and added up together to obtain an overall performance score for each bank counter, which gives an indication of the bank counters most worthy to invest in.

SECTION 1 – CURRENT EARNINGS, SHARE PRICE AND PRICE TO EARNING (P/E) RATIO

In terms of share price and earning per share, Public Bank, Hong Leong Bank and Maybank are the top three performers. Accordingly, these three counters also have the highest P/E ratio, indicating they are more expensive to invest in. However, P/E ratio below 15 is still considered as reasonable and not too expensive. Also, as shown by the five-year earning per share trend, it is shown that all of the bank counters have relatively steady earning per share that does not fluctuate too much from year-to-year. In particular, Public Bank shows an overall increasing trend of earnings from year 2015 to 2019.

SECTION 2 – DIVIDEND PER SHARE, DIVIDEND YIELD AND DIVIDEND PAYOUT RATIO

Dividend payout by listed companies to shareholders is an additional return of investment to shareholders in addition to the increase of share values. Generous dividend payout to shareholders will attract more investors to invest in the counter.

The recent decrease of almost all banks’ share prices results in increase in dividend yield received by investors. In some cases, dividend yield is above 5%, which is higher than fixed deposit rate. According to below bar graphs. It is shown that Public Bank, Maybank and Hong Leong Bank paid out the highest amount of dividends in the latest financial year. However, these counters also have higher share price than others. Taking into account of the current share price, Maybank gave the highest dividend yield of all, which is above 6%. Maybank is also the most generous bank counter, which pays more that 75% of its earnings to shareholders in the form of dividend.

SECTION 3 – PERFORMANCE OF THE BANK MANAGEMENT

The long term success and profitability of the bank counters will depend of the efficiency and smart strategies of the banks’ management team. Some of the indicators offer ideas on the strength of the management teams.

Among the bank counters investigated, it is shown that Public Bank has the most able management. It has the highest return on equity, meaning it earns the most profit per unit of capital provided by the shareholders. Also it has the lowest cost-to-income ratio, meaning it is able to control operational cost to the lowest possible level. Also, Public Bank has the lowest gross impaired loans ratio, meaning it has good system in place to choose the most reliable borrowers, who are less likely to default on their loans.

SECTION 4 – CASH AND ASSETS VALUES

Sufficient amounts of assets and cash are important for security of the bank counters in case any emergency situations happen. According to below graphs, it is shown that all banks counters investigated are well-supported by sufficient amount of assets, such as net tangible assets (NTA), market capital and cash flows. So, overall these bank counters are safe to invest in.

SECTION 5 – OVERALL PERFORMANCE AND SCORING OF THE BANKS

Each of the investigated bank counters are assigned a score based on the above indicators. For each indicator, the best performing counter is given score 8, the second best performing counter is given score 7 and so on. The total score for each counter is added up to give an overall performance score of each counter. According to the below graph, overall best performing counters are Public Bank, Maybank and Hong Leong Bank, respectively. In conclusion to the above analysis, these are the three counters most recommended to invest in in the banking sector.

NOTES:

**DATA BASED ON ROLLING 4 QUARTERS AS OF 19/11/2019 AND THE LATEST PUBLISHED FINANCIAL REPORTS.

VOL: VOLUME, EPS: EARNING PER SHARE, NTA: NET TANGIBLE ASSET PER SHARE, DPS: DIVIDEND PER SHARE,

P/E: PRICE EARNING RATIO, ROE: RETURN ON EQUITY, DY: DIVIDEND YIELD, DPR: DIVIDEND PAYOUT RATIO

Latest analysis reports of individual bank counters:

1.       MAYBANK

https://louisesinvesting.blogspot.com/2019/10/comments-on-malayan-bank-berhad-1155.html

2.       PUBLIC BANK

https://louisesinvesting.blogspot.com/2019/10/comments-on-public-bank-berhad-1295.html

3.       HONG LEONG BANK

https://louisesinvesting.blogspot.com/2019/10/comments-on-hong-leong-bank-berhad-5819.html

4.       RHB BANK

https://louisesinvesting.blogspot.com/2019/11/comments-on-rhb-bank-berhad-1066.html

5.       CIMB BANK

https://louisesinvesting.blogspot.com/2019/10/comments-on-cimb-group-holdings-berhad.html

6.       AM BANK

https://louisesinvesting.blogspot.com/2019/11/comments-on-ammb-holdings-berhad-1015.html

7.       ALLIANCE BANK

https://louisesinvesting.blogspot.com/2019/11/comments-on-alliance-bank-berhad-2488.html

8.       AFFIN BANK

https://louisesinvesting.blogspot.com/2019/11/comments-on-affin-bank-berhad-5185.html

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