Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with an unchanged fair value of RM9.90/share pegging the stock to a P/BV of 1.2x, supported by FY22 ROE of 9.8%. We make no changes to our earnings estimates.

• Maybank recorded lower core earnings of RM1.8bil (-8.6% QoQ) in 3Q21 attributed to higher pre-emptive provisions in the quarter. The group further topped up management overlays by RM547mil largely for its retail loan portfolio.

• 9M21 core earnings came in at RM6.1bil (+18.6% YoY), supported by higher total income and lower provisions.

• The group’s cumulative core net profit was within expectation, accounting for 78.6% of our and consensus estimate.

• Opex remained well controlled with a growth of 2.5% YoY for 9M21. This led to a positive JAW of 1.3% YoY.

• The group’s overall loans grew by 4.0% YoY in 3Q21. This was supported by growth in community financial services’ (CFS) loans in Malaysia while in Singapore, CFS and global banking loans accelerated.

• Group deposit growth further slowed down to 2.8% YoY in 3Q21 vs. 5.5% YoY in 2Q21. This was contributed by the contraction of FDs in Malaysia, Singapore and Indonesia.

• Gross impaired loans declined by 11.6% QoQ or RM1.4bil to RM10.5bil in 3Q21 contributed by loan write-offs, recoveries and repayments. As a result, the group’s GIL ratio improved to 1.93% in 3Q21 (2Q21: 2.18%).

• In 3Q21, the group further top up management overlays by RM547mil largely for its retail loan portfolio. This brought the 9M21 management overlays to a total of RM987mil for loans under repayment assistance, model change in Singapore and high risk & vulnerable borrowers. Additionally, it has topped up its provisions for new and existing impaired loans by RM1.5bil bringing the total provisions to RM2.5bil for 9M21.

• Annualised net credit cost for the group of 0.61% for 9M21 was within management’s guidance of 0.70%–0.80% for FY21.

Source: AmInvest Research - 26 Nov 2021