Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with an unchanged FV of RM9.80/share based on an ROE of 10.8% leading to a FY20 P/BV of 1.4x. We fine-tune our FY19/20/21 earnings by -0.4%–3.0%/-1.8% by adjusting our net interest income estimates as well as raising slightly our credit cost assumptions.

• The group reported an improved net profit of RM2.0bil (+3.0% QoQ) in 3Q19 on the back of stronger NII from NIM expansion and higher NOII supported by rise in investment and trading income partially offset by higher provisions.

• 9M19 earnings of RM5.75bil slid -0.7% YoY with a higher total income offset by increase in opex and provisions. Cumulative earnings were within expectations, making up 72.4% of our and 72.1% of consensus estimates respectively.

• Opex grew 5.5% YoY in 9M19 due to higher personnel and marketing expenses. The group posted a neutral JAWs of for 9M19. 9M19 CI ratio of 47.1% was slightly higher than our FY19 estimate of 46.0%.

• Loan growth decelerated to a YTD annualised growth rate of 2.0% or 3.4%YoY. Malaysia loans picked up pace but was offset by the slowdown of loans in Singapore and Indonesia.

• Net interest margin (NIM) improved 13bps QoQ to 2.32% as margin recovers in Malaysia from repricing of deposits after the OPR cut of 25bps in May 2019 and the release of FDs in Indonesia that were built up prior to the general election.

• Group GIL ratio increased slightly to 2.67% from 2.62% in the preceding quarter contributed by impairments of corporate banking loans related to the energy and trade sector in Singapore as well as impairments of retail SME (RSME), business banking and corporate banking loans in Indonesia. Annualised credit cost rose to 0.73% in 3Q19 from 0.30% in 2Q19. For 9M19, it was higher at 0.49% (9M18: 0.40%). Nevertheless, credit cost is likely to improve in 4Q19 as the group pushes for recoveries.

• The group’s capital ratios remained healthy with a CET1 ratio of 14.4%.

Source: AmInvest Research - 29 Nov 2019