Bank stocks fall

UBS has lowered its earnings estimates for Malaysian banks, mainly because of higher new non-performing loans run rate

MALAYSIAN banks fell, led by Bumiputra-Commerce Holdings Bhd, after UBS AG cut earnings estimates on financials services companies, citing slower growth, higher inflation and rising interest rates.

Malayan Banking Bhd, Malaysia's largest bank by assets, dropped 5 sen, or 0.7 per cent, to close at RM7, while RHB Capital Bhd declined 8 sen, or 1.9 per cent, to RM4.04. Bumiputra-Commerce, the second-biggest bank by assets, lost 15 sen, or 2 per cent, to RM7.40.

"We lower our earnings estimates for banks principally because of higher new non-performing loans run rate, as borrowers' repayment capacity has been affected by inflation-eroded cashflow," UBS analyst Yoke Lan Jan said in a note today.

Malaysia's inflation rate may reach a nine-year high of 5 per cent this month after the government lifted gasoline and diesel prices, Bank Negara Malaysia said earlier this month. The central bank, which meets to review borrowing costs on July 25, has also kept its overnight policy rate at 3.5 per cent.

UBS has cut its price target for Malayan Banking to RM8.20 and lowered RHB Capital's share target to RM6. Bumiputra-Commerce's price target was cut to RM11.5. UBS has kept its "buy" rating on all three banks.

The benchmark Kuala Lumpur Composite Index fell for a sixth day, losing 19.56, or 1.7 per cent, to 1,134.14, a day after trading on the stock exchange's equity market was suspended due to a systems failure. The index is at the lowest in more than a year. - Bloomberg