Banking Weekly Review: 8th – 14th December 2008

December 15, 2008 at 7:10 am Leave a comment

· A quiet week on newsflows domestically
In a shortened trading week, the only noteworthy piece of news domestically was the completion of the AMMB Group’s insurance units’ restructuring, and the completion of Friends Provident PLC’s acquisition of a 30% equity stake in AmLife Insurance Berhad. With this new strategic partnership, the company is now focusing on double-digit growth in its total premium for the
current financial year, supported by new product offerings. RHB Capital also announced the proposed issuance of up to RM1.1bn in nominal value commercial papers and/or medium term notes, to repay existing borrowings and for working capital and capital expenditure purposes.
· But news of more turmoil globally
In a week where Bank of America announced its intention to shed more than 30,000 of its workforce globally, three of Australia’s largest banks announced a collective capital-raising exercise totalling some USD6.7bn (AUD10.1bn) to boost balance sheets dented by rising defaults.
The world’s biggest fnancial institutions have raised about USD894bn in new capital since the start of the crisis last year, triggering almost USD1tn in write-downs and losses.
· Valuations undemanding
While we continue to maintain our NEUTRAL stance on the sector as a whole, we are positive on the propsects of and expect stronger recoveries in the share prices of AMMB Holdings and BCHB Holdings when market conditions improve. Maybank’s potential impairments on its overseas
acquistions continue to concern us, despite its current weak share price. For the more risk averse, Public Bank will continue to remain a solid investment into strength, despite its investment risk-rewards leaving slightly lesser scope for upsides as compared to the rest. Its attractive dividend yields adds to the strong investment merits in the stock. The same can be
said about Hong Leong Bank, though not in the same breath.

ACTIVITY IN THE MARKET WEAK IN THE RECENT WEEK
The Employees Provident Fund (EPF) continued to be the notable shareholder accumulating more shares in its banking holidngs. In terms of share price performances of stocks under coverage, AMMB Holdings came out as the only significant gainer for the week.

BANKING NEWSFLOWS

· AMMB Holding’s commercial banking unit, AmBank Bhd, has stated that it will continue to lend despite the expected slowdown in the country’s GDP next year. Group Chairman, Tan Sri Azman Hashim, said that the bank had sufficient capital to lend but will certainly be more cautious amid the global financial crisis. The bank’s focus will be on consumer financing, housing and hire-purchase.
· Commonwealth Bank of Australia, Westpac Banking Corporation and Australia & New Zealand Banking Group Ltd raised about AUD10bn during the week by selling stock and bonds to boost its respective balance sheets which had been dented by rising defaults. Commonwealth will sell up to AUD750m in stock to Merrill Lynch and price AUD2.7bn of bonds. Westpac sold AUD2.5bn in stock and AUD1.5bn of notes while ANZ sold AUD2.7bn of debt.
· The world’s biggest financial companies have raised USD894bn in new capital since the sub-prime crisis began last year, triggering almost UDS1tn in write-downs and losses, data compiled by Bloomberg showed.
· Lehman Brothers has asked a judge to approve the disposal of a French investment banking unit to Banque Nomura France, a unit of Nomura Holdings Inc for €1. In exchange for assuming unspecified liabilities, Nomura will gain employees, commercial records, information technology, furniture and other assets.

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15 December 2008 Newz Bits Construction Weekly Review: 8th – 14th December 2008

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