Banks and glove makers expected to see strong profit rebound
PETALING JAYA: Banks, as well as glove makers, may be the sectors that will lead the charge for a strong rebound in corporate earnings this year.
This is because the banking sector is a proxy for the economy at large which is recovering while glove stocks are expected to continue their winning streak.
In its outlook note, TA Research said corporate profits would show a significant increase this year, especially given the strong contribution from glove makers.
“The four glove companies under our cover, Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd will experience an increase in their total profits to 20.8 billion RM in 2021 from 10.9 billion RM and 1.8 billion RM in 2020 and 2019 respectively, ”he said.
However, the research house noted that their incredible earnings performance this year would not be repeated, as aggregate profits of glove manufacturers normalize to RM12.4 billion in 2022 due to sagging average selling prices. as vaccines are deployed.
“The huge RM 8.4 billion decline in gloves profits from 2021 will be offset by a pickup in profits in banking, gaming, oil and gas, telecommunications and transportation,” said TA Research.
“The easing of containment measures as part of the massive vaccine rollout, improving private sector demand and consumer spending as labor market conditions improve, external demand and continued accommodative policies should support households and businesses, ”TA said.
“This will then help revive loan growth, which we expect to grow by 6%, supported by a 6.2% and 5.8% increase in consumer and business loans,” he added. .
He noted that despite uncertainties about the credit outlook, Bank Negara appeared to ensure system liquidity by relaxing equity capital and buffers to support lending activities.
“We like Alliance Bank Malaysia Bhd, Hong Leong Bank Bhd, Malaysian banking bhd and RHB Bank Bhd as an indicator of economic recovery and resumption of activity in capital markets, ”said TA Research.