Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM10.30/share, 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 3.0% based on a 4-star ESG rating.

• We have made no changes to our earnings estimate as 6MFY22 net profit was within expectations, accounting for 46% of our FY22F earnings and 49% of consensus estimate.

• Maybank recorded lower core earnings of RM2.0bil (-11% YoY) in 2QFY22 despite a stronger total income contributed by higher net fund and fee-based income. This was attributed to higher operating expenses (opex) and provisions with the group increasing its management overlays in 2QFY22 as a pre-emptive measure due to macro headwinds.

• This brings the total management overlays to RM1.7bil, of which 37% or RM641mil has been allocated for community financial services (CFS) retail and retail SME (RSME) portfolios.

• Core net profit for 6MFY22 came in at RM4.2bil, a decline of 3.8% YoY largely due to a drop in fee-based income. Owing to market volatility, market-related fees decreased with realised and unrealised losses on the group’s investment portfolio. Opex grew 4.6% YoY for 6MFY22 driven by higher marketing and IT expenses.

• The group’s overall loans gained traction to register a higher growth of 6.2% YoY in 2QFY22. This was supported by growth of loans in all key markets (Malaysia, Singapore and Indonesia). Malaysian loans grew 5.6% YoY in line with the industry.

• Group deposits were slightly slower at 5.3% YoY in 2QFY22. CASA rose 8.5% YoY supported by growth of low-cost deposits in Malaysia and Indonesia.

• 2QFY22 NIM expanded by 7bps QoQ to 2.41%. YTD, NIM rose by 6bps underpinned by the OPR hike and lower funding cost. Management alluded to further OPR hikes of up to 50bps for the remainder of this year to raise the benchmark interest rate to 2.75%.

• 6MFY22 provisions for loan losses were lower by 7% YoY Net credit cost of 45bps for 6MFY22 was within management’s guidance of 40–50bps for FY22.

• An interim dividend of 28 sen/share (21 sen cash and 7 sen electable for DRP) has been declared (payout: 86%).

Source: AmInvest Research - 26 Aug 2022