Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM9.80/share from RM9.50/share, pegging the stock to a higher P/BV of 1.3x after raising FY23F ROE to 10.9% from 10.5% previously. A 3% premium has been accorded to our valuation based on a 4-star ESG rating.

• We fine-tuned our FY23F/24F by +2.8%/+3.1% after lowering our credit cost assumptions and adjusting net interest margin (NIM) assumptions.

• 12M22 net profit was within our expectation, almost on the dot of our forecast. Meanwhile, it was ahead of street’s projection at 10% above consensus.

• 12M22 core net profit of RM9.1bil rose by +11.4% YoY after stripping out the impact of Cukai Makmur. This was attributed to higher NII and NOII as well as a decrease in provisions. Also, the group recorded stronger NOII for 12M22, supported by higher FX gains and MTM gains on financial liabilities.

• Opex grew by 11.2% YoY for 12M22 driven by higher personnel cost from collective agreement (CA) adjustments and marketing expenses (credit card gift points, advertising and publicity spend). This led to a higher CI ratio of 46.4% in 12M22. Excluding CA adjustments and gift point expenses, CI ratio would have been lower at 45.5%.

• Maybank recorded a flattish 4Q22 core earnings of RM2.4bil (+0.4% QoQ) with a stronger net interest income (NII) and lower provisions, offset by lower non-interest income (NOII). NOII declined in 4Q22 due to lower core fees, treasury and markets income.

• The group’s overall loans decelerated to 6% YoY in 4Q22 from 8.2% YoY in 3Q22. Malaysian loans grew 6.7% YoY above the industry’s 5.7% YoY growth.

• Group deposits’ growth eased to 3.5% YoY. FDs rose by 18.2% YoY while CASA balances declined by 10% YoY. The group’s CASA ratio slipped to 40.9% in 4Q22 vs. 43.8% in 3Q22.

• 4Q22 NIM contracted by 3bps QoQ to 2.39% due to higher funding cost from stiffer deposit competition. For 12M22, NIM rose by 7bps to 2.39% as a result of higher interest rates in key markets. Management alluded to another interest rate hike of 25bps domestically, raising OPR to 3.00% and another 25bps increase in Indonesia.

• 12M22 provisions for loan losses were lower by 17.6% YoY. Net credit cost of 37bps in 12M22 was within management’s guidance of 40–50bps for FY22. With no further top up to management overlays in 4Q22, total overlays remained at RM1.7bil, of which 38% or RM646mil has been allocated for the CFS retail and RSME portfolios.

• A full cash 2nd interim dividend of 30 sen/share has been declared leading to total dividends of 58 sen per share (payout: 84.6%) for 12M22.

Source: AmInvest Research - 28 Feb 2023