Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value of RM9.50/share from RM8.40/share based on an FY21 ROE of 8.5% and pegging the stock to P/BV of 1.2x (previously 1.1x) on a lower risk premium. We tweak our FY20/21 net profit higher by 1.7%/0.4% to reflect higher net interest margin (NIM) assumptions.

• Maybank’s 3Q20 recorded higher core earnings of RM1.95bil (+65.4% QoQ) on the back of recovery in NIM, higher NOII (from rise in core fees and investment income & trading income) and lower provisions.

• 9M20 core net profit came in at RM5.18bil (-9.9% YoY). Underlying 9M20 core profit was within our expectation at 79.2% of our FY20 full-year estimate. Nevertheless, it was above consensus projections, making up 86.6% of street’s numbers.

• Opex remained well controlled as it declined 2.8% YoY for 9M20, contributed by lower personal cost and marketing expenses. This led to a positive JAW of 3.9% YoY.

• Loan growth remained subdued at -0.6% YoY with the expansion of loans in Malaysia offset by slowdown in international markets’ (Singapore and Indonesia) loans.

• Group deposits accelerated to faster to 4.8% YoY contributed by the expansion of CASA in home markets (Malaysia, Singapore and Indonesia) while the group’s FDs continued to contract to manage funding cost.

• Gross impaired loans continued to decline by 5.5% QoQ or RM706mil to RM12.2bil in 3Q20, contributed by loan write-offs and a slowdown in new impaired loans in key home markets as certain loan borrowers were under the payment assistance and relief programmes.

• Net credit cost for the group was lower at 0.62% in 3Q20 vs. 1.34% in 2Q20. For 9M20, Maybank’s credit cost was 0.89% vs. 0.49% in 9M19 which is still within management’s guidance of 0.75%–1.00% for FY20.

• The group declared an interim dividend of 13.5 sen/share (payout: 30.7%) which was lower than the past years. The interim dividend will be fully electable for reinvestment into additional shares under the DRP.

Source: AmInvest Research - 30 Nov 2020