Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM10.30/share from RM10.00/share after rolling forward our valuation to FY23F, pegging the stock to a P/BV of 1.3x supported by an ROE of 11%. Our FV has taken into account a premium of 3% based on a 4-star ESG rating.

• We make no changes to our earnings estimate. Underlying net profit was within expectation, accounting for 24% of our and 26% of consensus estimate.

• Maybank recorded lower core earnings of RM2.2bil (-7% YoY) in 1Q22 despite stronger fund-based income from a NIM expansion and loan growth coupled with a decline in provisions. This was mainly attributed to lower non-fundbased income from a drop in investment and trading income and core fees. We gather that market-related fees have slipped YoY.

• Opex remained well controlled with a growth of 4% YoY for 1Q22 mainly driven by higher marketing, admin and general expenses.

• The group’s overall loans grew by 5% YoY in 1Q22 (4Q21: 5.7% YoY). This was mainly supported by growth in community financial services’ (CFS) and global banking (GB) loans in Malaysia and Singapore. Also, Indonesia’s expansion of GB loans contributed to the growth.

• Group deposits expanded by 5.5% YoY in 1Q22 vs. 6.5% YoY in 4Q21. CASA grew 9.6% YoY while expensive FDs were trimmed in Indonesia and Singapore. Group CASA ratio rose to 46%.

• NIM in 1Q22 expanded by 3bps YoY to 2.34% underpinned by lower funding cost. Management alluded to another OPR hike of 25bps in 2H2022 to raise the benchmark interest rate to 2.25%. Typically, a 25bps rise in the OPR will increase the group’s NIM by 1–2bps.

• Gross impaired loans decreased by 0.8% QoQ in 1Q22 contributed by loan write-offs. As a result, the group’s GIL ratio declined modestly to 1.95%.

• In 1Q22, provisions for loan losses declined by 48% YoY contributed by lower provisions for stage 2 loans and higher recoveries. Net credit cost of 32bps for 1Q22 was within management’s guidance of 40–50bps for FY22.

Source: AmInvest Research - 27 May 2022