Highlights

Malayan Banking - Modest improvements

Date: 30/11/2018

Source  :  HLG
Stock  :  MAYBANK       Price Target  :  10.00      |      Price Call  :  HOLD
        Last Price  :  8.94      |      Upside/Downside  :  +1.06 (11.86%)
 


Maybank’s 9M18 net profit of RM5.78bn came in line with our and consensus full year net profit forecast, representing 72% and 73.5% respectively. Loandecelerated to 4.5% YoY vs. 4.6% YoY in 6M18. . Customer deposits eased to 3.8% YoY (5.5% YoY in 6M18) on the back of weaker all market deposits accumulations. GIL ratio continued on upward trend, attributed to the weaker GIL in Singapore and Indonesia. No change to our forecasts, Maintain HOLD at TP of RM10.00, based on GGM- (COE 11.3% and WACC of 8.8%).

Results in line. 3Q18 net profit of RM1.95bn (-0.1% QoQ, -3.5% YoY), bringing 9M18 net profit higher by 7.4% YoY to RM5.78bn. The results came in line with our and consensus full year net profit forecast, representing 72% and 73.5% respectively.

QoQ. Net profit moderated marginally by 0.1% as slower loan loss provision by - 18.1% was more than negated by subdued operating income caused by weak NOII. Despite higher net investment and trading income, however it was offset by slower forex income that caused overall weakness in NOII.

YoY. Despite lower allowance of loan loss by RM163.6m, net profit eased by -3.5% on the back of weak NOII by -16.1% and higher opex by -7.4% respectively.

YTD. Net profit advanced faster by 7.4% to RM5.78bn assisted by (i) higher net interest income by 2.2% YoY (ii) slower opex by -3.9% YoY and (iii) slower loan loss provision by -14.2% YoY.

Loan growth. Loan decelerated to 4.5% YoY vs. 4.6% YoY in 6M18, however on YTD loan advanced at 3.7%. The growth was led by ex-Malaysia loan growth of 4.7% YoY especially by Indonesia loan growth of 7.1% YoY (3.1% YoY in 6M18) while Malaysia loan growth softened to 4.9% YoY (6.1% YoY in 6M18). Malaysia loan growth was distorted by global banking loan growth, eased to 1.3% YoY (4.6% YoY in 6M18).

Deposits. Customer deposits eased to 3.8% YoY (5.5% YoY in 6M18) on the back of weaker all market deposits accumulations, led by Malaysia by 6.7% YoY (10.1% YoY in 6M18) and Singapore by 1.7% YoY (11.6% in 6M18). Despite weaker total deposits, CASA ratio (including investment account) stood unchanged at 35.1%. NIM declined by 1bps QoQ to 2.32% amid its stance on building up liquidity buffer during 1H18. As a result, Maybank lowering its targeted NIM to flat or marginal compression in FY18.

Asset quality. GIL ratio continued on upward trend, attributed to the weaker GIL in Singapore and Indonesia, which rising to 3.7% (3.68% in 6M18) and 4.13% (4.05% in 6M18). Credit charge slower to 41bps in 9M18 vs. 44bps in 1H18 due to lower provision.

Forecast. We Leave Our Forecasts Unchanged.

Maintain HOLD, TP: RM10.00. Although its annualised ROE nearing 11% guidance, we believe uncertainty in provision will pose a risk to Maybank earning delivery in FY18. We maintain our HOLD rating on Maybank with unchanged TP of RM10.00 based on GGM of (i) COE 11.3% and (ii) WACC of 8.8%).

 

Source: Hong Leong Investment Bank Research - 30 Nov 2018

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