JPMorgan has cautioned investors to brace for volatility as the ASEAN banking sector enters the second-quarter earnings season, predicting that results will bring unexpected turns.
The bank suggests increasing exposure to carefully selected lenders in Thailand, Vietnam, Malaysia, and the Philippines, while paring back holdings in Singaporean and Indonesian banks ahead of their financial reports.
For Thailand, JPMorgan highlights that dividend per share (DPS) growth, rather than the more commonly watched earnings per share growth (EPSg), will be the primary driver for Thai banks, contrary to traditional analyst expectations. This divergence is expected to keep surprising the market. In Vietnam, banks are seen as likely beneficiaries from early gains in trade activity.
Malaysian banks are expected to deliver the most stable performance across the region, with pre-provision operating profit, asset quality, and capital management staying within a consistent range, a steadying factor during these volatile times. Philippine banks, meanwhile, continue to post robust double-digit loan growth and return on equity, steadily compounding their book value.
In contrast, Singapore banks face potential post-earnings downside risk due to pressure on net interest margins. While further cuts could follow lackluster results, JPMorgan notes that such declines might create longer-term buying opportunities. Indonesian bank stocks are trading near historically low valuations, but persistent concerns over liquidity mean any positive outlook remains out of reach, and the bank foresees ongoing negative earnings revisions.
JPMorgan’s top “overweight” picks going into the earnings season include KBANK, KTB, VCB, TCB, PBK, AMM, BDO, and Jago, while the firm maintains a cautious stance on BRI, BMRI, BNI, BBL, UOB, and MBT.
