Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a lower FV of RM9.50/share pegging the stock to a lower ROE of 10.0%, leading to a FY20 P/BV of 1.3x. We fine-tune our FY20/21 earnings by 0.6%/-5.5% as we factor in another potential interest rate cut of 25bps in 1H 2020 and tweaked our NOII projection.

• Our earnings estimates have now taken into account a total OPR reduction of 50bps for FY20 which includes the OPR cut of 25bps on 22 Jan 2020.

• The group reported an improved net profit of RM2.5bil (+22.5% QoQ) in 4Q19 on the back of lower provisions.

• 12M19 earnings of RM8.2bil grew modestly by 1.0% YoY with a higher total income offset by rise in opex and provisions. Cumulative earnings were within expectations, making up 103.7% of our and 103.8% of consensus estimates respectively.

• Loan growth was tepid at 1.2%YoY as the expansion of Malaysia loans was offset by contractions of loans in Singapore and Indonesia.

• The group is cautious on corporate loans in Singapore and Indonesia due to the weaker asset quality in these international markets.

• Net interest margin (NIM) slipped 3bps QoQ to 2.29% due to lower asset yields. The group has continued to trim its excess liquidity in Indonesia with a contraction in FDs owing to the slowdown of loan growth in the country.

• Group GIL ratio improved slightly to 2.65% from 2.67% in the preceding quarter supported by reclassification of R&R loans to performing. FY19 credit cost rose of 0.44% was within our expectation and management guidance.

• The group’s capital ratios remained healthy with a CET1 ratio of 14.6%.

• The group has proposed a final dividend of 39 sen share bringing total dividends to 64 sen/share (all cash dividends with no DRP option). This translated to a highest dividend payout of 88.0% beating our expectation of a payment of 55.0 sen for FY19.

Source: AmInvest Research - 28 Feb 2020