Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM10.40/share pegging the stock to P/BV of 1.3x supported by FY22 ROE of 10.4%. Our FV reflects an additional 3% premium from an assigned 4-star ESG rating.

• The group held a briefing (Investor Day) on Monday to provide updates on its sustainability strategic priorities and commitments for ESG.

• Recall, under the group’s 5-year strategy (M25) unveiled in April 2021, Maybank aims to become the regional ESG leader by 2025 with a net-zero carbon emissions position.

• We understand that the sustainability drive will be anchored by 3 key pillars: i) enabling responsible transition to a low-carbon economy; ii) empowering communities and undertake responsible actions to promote economic development and social well-being; and iii) leading by example with good corporate governance practices (Exhibit 1).

• Maybank has reaffirmed its no deforestation, no peat and no exploitation (NDPE) stance. It has also committed to no financing of blacklisted and new coal activities.
   
• The Group Outlined 4 Key Commitments to Achieve Its Aspiration to Become a Regional ESG by 2025:

1. Mobilising RM50bil in Sustainable Finance;
2. Improving the Lives of 1mil Households Across Asean;
3. Achieve carbon neutrality on own emissions (scopes 1 and 2) by 2030 as well as a netzero carbon emission position by 2050; and
4. Achieve 1mil hours per annum on sustainability and deliver 1,000 significant SDG-related outcomes.

• Under the 1st commitment, ESG criteria will be integrated into the direct lending, investments and services of business divisions. The business divisions will be guided by sustainable product frameworks.

• For the 2nd commitment, Maybank will continue its existing community initiatives, providing welfare assistance and financial aids to the SMEs and underserved communities. The group also intends to widen its retail product reach to the untapped communities for greater financial inclusion as well as improve the financial literacy of SMEs and school children.

• On the 3rd commitment, we understand that group plans to reduce its own carbon emissions by sourcing renewable energy, improving infrastructures, reducing staff travelling and increase its green building footage. Besides, the group will manage its own water and waste consumption and recycling efforts.

• Key initiatives for the 4th commitment include people engagement, strengthening of business ethics policies & practices, responsible data management, compliance with law, and strengthen the transparency & trust among stakeholders.

• To oversee sustainability strategy and embed sustainable considerations across the group, a board sustainable committee (BSC) has been established. BSC reports to the board of directors and sits on top of the exco sustainable committee and chief sustainable officer.

• In order to embed ESG into its business decision-making, Maybank has rolled out its framework for sustainability with the relevant risk acceptance criteria for industries and customers. Meanwhile, sustainable product frameworks are in the process of being developed.

• We are comforted by the group’s low exposure to ESG vulnerable sectors. The group highlighted that its loan exposure (funded) to the palm oil, oil & gas, forestry and logging, coal and mining (minerals) was low at 2.29%, 2.04%, 0.66%, 0.20% and 0.18% respectively as of end March 2021. Its non-funded exposure or holdings of bonds related to these vulnerable sectors were also low at well below 1.0%.

• Maybank received a rating of “AA” in the MSCI ESG Ratings assessment. The group has consistently been included in the FSTE4Good indices for the past 8 straight years, reflecting the recognition of its sustainability efforts and practices.

Source: AmInvest Research - 21 Jul 2021