Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM10.00/share (previously: RM9.90/share) pegging the stock to P/BV of 1.3x supported by FY22 ROE of 9.9%. Our FV takes into account a premium of 3.0% based on a 4-star ESG rating.

• We raise our FY22/23 earnings by 6.6%/2.4% after fine-tuning our NIM assumptions and lowering credit cost estimates.

• Maybank’s recorded a stronger core earnings of RM2.1bil (+14.7% QoQ) in 4Q21. This was mainly attributed to higher net fund-based income from the acceleration in loan growth, stronger NIM expansion and lower provisions partially offset by an increase in opex.

• 12M21 core earnings came in at RM8.2bil (+23.3% YoY), supported by higher total income and lower provisions. Net fund-based income grew by 14.6% YoY but was partially offset by lower fee-based income of 21.6% YoY due to a decline in investment disposal gains and marked-to-market losses of its insurance unit’s fixed income portfolio. Core net profit was within expectation, accounting for 104.8% of our and 99.4% of consensus estimates.

• Opex remained well controlled with a growth of 2.6% YoY for 12M21. This led to a positive JAW of 0.2% YoY.

• The group’s overall loans growth accelerated to 5.7% YoY in 4Q21. This was supported by the growth in community financial services’ (CFS) loans in Malaysia and an expansion of CFS and global banking (GB) loans in Singapore.

• Group deposit grew at faster pace of 6.5% YoY in 4Q21 vs. 2.8% YoY in 3Q21. This was contributed by the expansion of CASA across all home markets while expensive FDs were trimmed in Indonesia and Singapore.

• NIM for FY21 expanded by 22bps YoY to 2.32%, underpinned by lower funding cost from the strong CASA growth and pick up in loan growth.

• Gross impaired loans rose by 5.7% QoQ or RM594mil in 4Q21, contributed by the classification of certain performing corporate loans to the impaired status based on judgmental/obligatory triggers. As a result, the group’s GIL ratio increased slightly to 1.99%.

• In 4Q21, provisions for loan losses declined by 86.0% QoQ due to write-backs of some management overlays and recoveries. Net credit cost of 0.51% for 12M21 was within management’s guidance of 0.70%–0.80% for FY21.

• Declared a 2nd interim dividend of 30 sen/share (7.5 sen electable for reinvestment under DRP). This brings total dividends for FY21 to 58 sen/share (payout: 84.5%), slightly higher than our estimate of 53 sen/share.

Source: AmInvest Research - 25 Feb 2022