KUALA LUMPUR: Alliance Bank Malaysia, Bank Islam Malaysia, CIMB Group Holdings Bhd and RHB Bank Bhd have shown improvements in environmental, Social and Governance (ESG) commitments.
Hong Leong Investment Bank said CIMB is ranked first place with an ESG grade of 4.3 points while Affin Bank Bhd is at the bottom of the rankings with 3.4 points.
"Regardless, the sector's risk-reward profile is balanced, in our view.
"We retained a neutral call with buy ratings for Public Bank Bhd, AMMB Holdings Bhd, and Alliance Bank Malaysia," it said in a note today.
The average rating for the banking sector stood at 3.8 points (flat vs prior year); the research house saw most banks continued to score well for Governance, progressed year-over-year in Social but still performed subpar for Environmental, it said.
Overall, 4 banks under its coverage showed year-over-year improvement.
"Nevertheless, we still find that the banking sector's risk-reward profile to be balanced.
"Currently, we only have a single large cap 'buy' rating under our coverage - Public Bank Bhd with a target price of RM4.80 for its defensive characteristics and multi-year low foreign shareholding.
"For mid-sized banks, AMMB with a target price of RM4.20) is favoured for its larger dividend payout bandwidth in the near future.
"While for small banks, we like Alliance Bank with a target price of RM3.95 given its inexpensive valuations," it added.