THOSE who had invested in lower liner stocks over the last three months probably have had a joyous ride while those who stuck to defensive plays were laggards by a mile.

For those who are looking out for companies with earnings visibility, but with a bit more volatility, could this be the time to consider Malaysia’s relatively higher beta banking stocks even as most other blue chip banking stocks appear to be a tad over valued following the recent run?

Analysts say some of these companies may be a little fickle in delivering consistent earnings, but most are backed by fundamentals and even enjoy edgier returns.

However, the outlook on Malaysia’s economic growth isn’t all that clear at this juncture; first quarter gross domestic product (GDP) contracted at 6.2% while the government has revised GDP forecast for the year downwards to between -4% and -5%.

Below, a quick look at some of these high beta banking counters. (Beta is a measure of a stock’s price volatility relative to the overall market):

RHB Capital

Despite the rise in RHB Capital’s non performing loans (NPLs) and a slowdown in loan growth, analysts say potential re-rating catalysts include the value-add from its strategic partner – Abu Dhabi Commercial Bank, benefits from the transformation programme, potential overseas acquisition and regional expansion and the expected improvement in investment banking income.

RHB Capital’s first quarter to March 31 net profit inched up 2.8% to RM228.6mil, which was equivalent to 26% of street estimates full-year forecast.

These earnings were mainly supported by a RM20.1mil write-back of impairment losses. Loan loss provisioning increased 15% due to a 21.6% rise in specific provision charges. Non-interest income fell 12.4% owing to a 56.2% plunge in foreign exchange gains and lower capital market-related fee income.

Net NPL ratio rose from 2.24% as at end-December 2008 to 2.57% as at end-March 2009 while loan loss coverage receded from 90.3% to 84.9%. New NPLs rose 30.7% quarterly to RM1.1bil.

Analysts are anticipating lower earnings in the coming quarters due to an expected rise in credit costs. However, CIMB Research remains positive on RHB Capital based on the re-rating catalysts and attractive valuation at 10.3x financial year (FY) 2010 price earnings.

CIMB has a targeted net profit of RM745.2mil on the back of RM2.02bil in revenue for FY09. It rates the stock an “outperform” with a target price of RM5.22.

EON Cap

EON Capital Bhd’s net profit for the first quarter (Q1) ended March 31, 2009, rose 4.25% to RM79.56mil from RM76.32mil, underpinned by lower allowances for loans and advances. Revenue, however, fell 3.9% to RM604.4mil from RM628.98mil a year earlier. The higher net profit was attributable to lower loans provisions by RM49.2mil.

EON Cap has clarified that its higher net NPL ratio was mainly due to two lumpy loans of RM50mil each (with one already turned performing in April 2009).

Maybank Investment Research says that EON Capital’s gross NPL ratio grew to 5.2% in the first quarter from 4.8% in the previous quarter due mainly to loans extended to the construction sector that turned bad.

“Despite the higher gross NPLs, the banking group had registered a 4.25% increase in its 1Q09 net profit to RM79.56mil from RM76.32mil a year earlier mainly due to lower loan loss provisions by RM49.2mil or 58.1%,” says Maybank. Amid weaker loans growth, analysts are expecting higher NPL ratios.

Meanwhile, analysts remain unmoved by EON Cap’s proposed warrant issue worth RM29.5mil to Hong Kong-based private equity firm Primus Pacific Partners Ltd.

RHB Research Institute has maintained its “outperform’’ call on EON Cap. EON Cap announced on Tuesday a proposed issue of up to 58.7 million new warrants at 50.24 sen each, raising RM29.5mil.

Each new warrant entitles Primus to subscribe to one new ordinary share in EON Cap at RM6 per share at any time up to Jan 15, 2014. Primus is a substantial shareholder with an existing stake of 20.2% in EON Cap.

AMMB

AMMB Bhd’s first quarter to March net profit jumped by 28.8% to RM860.8mil, higher than consensus by 2.7%.

The group declared dividends of 8 sen for FY09 versus 6 sen for FY08.

“While we are positive on the benefits from the group’s ongoing transformation programme and the value-adds from ANZ, we are cognisant on the impact of a potential rise in NPLs. Hence, AMMB remains an underperform for now, premised on potential de-rating catalysts of a jump in loan loss provisioning (LLP), slower loan growth, and weak investment banking income,” says CIMB Research.

It says net profit was primarily driven by a 87.8% drop in minority interest following the privatisation of AmInvestment Group early last year and a 32.8% decline in LLP.

However, non-interest income declined by 24.4% due to a 95.2% slump in investment income, foreign exchange loss of RM17.8mil, lower capital market-related fee income, asset management fee (-13.7%) and brokerage income (-50.5%).

Loan growth eased to 4.9% in March 2009 from 7.4% in December 2008. The momentum in residential mortgages improved to 2.9% in March 2009 from 1.4% in December 2008, while the auto loan growth was pretty much stable at 1.3%.

The group’s net NPL ratio declined to 2.6% as at end-March 2009 from 2.7% as at end-December 2008. Meanwhile, loan loss coverage strengthened from 67.3% to 75.1% in FY09.

CIMB maintains its target price of RM2.92, pegged to a discount of 20% to its dividend discount model. It is forecasting net profit of RM860.6mil on the back of RM1.78bil in revenue for its year ended December 2009.

ECM Libra

For its fourth quarter ended Jan 31, 2009, ECM Libra Financial Group Bhd posted a net loss of RM3.55mil, versus a net profit of RM11.21mil a year earlier. Revenue fell 30% to RM16.24mil from RM23.37mil.

The loss was mainly due to the impairment loss of RM24mil in an associated company and lower brokerage income.

Lower brokerage income was caused by the lower turnover of RM86bil on Bursa Malaysia, compared with RM240.6bil a year earlier.

For the whole financial year, net profit fell sharply to RM5.1mil from RM82.43mil in FY08. Revenue more than halved to RM74.18mil from RM157.55mil.

The group is now looking to increase its remisier base over the next couple of years from its present 200. The investment banking group, which was formed via the merger between ECM Libra and Avenue Capital Resources in 2006, operates in five core areas; treasury, stockbroking, fund management, principal finance and investments and investment banking.