Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM9.80/share from RM9.50/share after rolling over our valuation to FY22. Our FV is now based on FY22 ROE of 10.0%, pegging the stock to P/BV of 1.3x. We raise our FY21/22 net profit by 18.9%/19.1% to reflect higher net interest margin (NIM) assumptions and NOII estimates.

• Maybank’s 4Q20 recorded lower core earnings of RM1.54bil (-21.3% QoQ) due to further proactive provisions taken.

• 12M20 core net profit came in at RM6.65bil (-18.8% YoY). The decline in cumulative earnings was mainly attributed to lower NII from flattish loan growth and a compression in NIM coupled with higher loan loss provisions. Meanwhile, NOII was stronger supported by the monetisation of bonds invested. Cumulative earnings were in line with our expectation, making up 100.0% of ours while it was 103.9% of consensus estimates.

• Opex remained well controlled with a decline of 2.7% YoY for 12M20, contributed by lower personal, establishment, marketing, admin and general expenses. This led to a positive JAW of 2.8% YoY.

• Loan growth remained flattish at 0.05% YoY with the expansion of loans in Malaysia dampened by slower international (Singapore and Indonesia) loans.

• Group deposits growth decelerated to 2.6 %YoY (3Q20: 4.8% YoY) due to a slower pace of deposits in Malaysia and Singapore while FDs in all home markets continued to contract to manage funding cost.

• GIL ratio of all home markets declined QoQ leading to lower group GIL ratio of 2.23%.

• For 12M20, Maybank’s credit cost was 0.88% vs. 0.44% in 12M19 and was within management’s guidance of 0.75%– 1.00%.

• The group declared a final dividend of 38.5 sen/share of which 21 sen is electable for DRP. Together with the 13.5 sen/share interim dividend, total dividends were 52.0 sen/share for FY20 with higher electable portion for reinvestment into additional shares under DRP.

Source: AmInvest Research - 26 Feb 2021