Investment Highlights

• We maintain BUY call on Malayan Banking (Maybank) with a revised fair value (FV) to RM10.00/share from RM9.80/share after rolling over our valuation to FY24. Our FV is pegged to P/BV of 1.3x supported by FY24F ROE of 11.4%. Our 4-star ESG rating has been maintained, resulting in a 3% premium to our FV.

• We make no changes to our earnings estimates.

• The group provided a briefing yesterday to update on the progress and focus of its key business sector, Group Global Banking (GGB).

• GGB is involved in wholesale banking services. These cover products, services and financial solutions offered through various business units namely, Corporate Banking, Global Markets, Investment Banking & Advisory, Investment, Asset Management and Maybank Ventures.

• The key markets for GGB are Malaysia, Singapore, Indonesia and Greater China. Also, it has presence in other ASEAN countries and key global financial centres like US, UK, Dubai and India.

• Recall in FY22, GGB contributed 37% to the group’s revenue and 47.3% of Maybank’s pre-provisioning operating profit (PPOP).

• By revenue and profit before tax (PBT) for wholesale banking business, GGB is ranked 1st in Malaysia and 4th in ASEAN.

• In Malaysia, for Corporate Banking loans, Maybank is ranked 1st with a market share of 19.3% as at Mar 2023, ahead of CIMB and Public Bank. Meanwhile, for the trade finance business, it has a strong overall market share of 20.6%.

• In unit trust, Maybank Asset Management Group (MAMG) is ranked 7th locally with year-to-date (YTD) market share of 3.1% as at Mar 2023 based on assets under management (AUM). Meanwhile, in terms of AUM market share by products, MAMG has a YTD (until end-Mar 2023) market share of 2.09%.

• MAMG has extended its retail distribution reach after the acquisition of Amanah Mutual and Singapore Unit Trusts in 2018. This saw a 10% expansion of its non-money market fund AUM from 2017 to 2022, outpacing the industry’s 3% growth.

• As at end of FY22, GCFS’ loans stood at RM202bil. This comprised largely of corporate financing (86%). By countries, GGB’s loans are contributed by Malaysia (43%), Singapore (32%), Greater China (11%) and Indonesia (6%).

• GGB’s deposits stood at RM271bil (44% FDs and 23% CASA) in 1Q23. Malaysia is the largest contributor to GGB’s total deposits at 62% followed by Singapore (24%).

• GGB will adopt segment-focused play, in which it intends to provide comprehensive services and solutions to meet client needs. Besides, it plans to leverage on sector specialisation and the offering of sustainable solutions to support customers’ decarbonisation pathways to net zero emissions. In Investment Banking, management sees the opportunity to increase its focus on the mid-market client segment across the region for potential fund raising via initial public offerings (IPOs), sustainable financing and private equity deals. On broker rankings in ASEAN countries, the group is ranked 4th in Malaysia, 7th in Thailand, 2nd in Indonesia and 6th in Philippines.

• The group intends to reshape the regional wholesale target operating model with collaboration between business and support units. To boost cross border income, technology platforms will be integrated, operations optimised, policies and risk appetites aligned regionally.

• GGB will accelerate investments in digital and technology capabilities to provide regional trade finance, cash management with integrated ecosystems and payment solutions. Besides, GGB will build on the end-to-end straight through processing platform integrating ecosystems and provide full investment solutions through digital platforms.

• Management alluded to opportunities to grow the income of GGB through cash management and the business of Global Markets. We understand that cash management business for SMEs and Corporate customers have already been integrated into one and it aims to collaborate with partners to provide solutions beyond banking offerings.

• Asset quality of GGB has improved as evidenced by the lower GIL ratio of 2.17% in 1Q23 vs. 2.48% as at the end of FY22. Credit cost for GGB decreased to 2bps in 1Q23 vs. 80bps in FY22 supported by lower net credit charge-off for all key markets (Malaysia, Singapore, Indonesia and Greater China). We understand that with macroeconomic variabilities, credit cost could increase slightly in the subsequent quarters of FY23 from the low level seen in 1Q23. The group is still maintaining its credit cost guidance of 35-40bps for FY23.

• As a proactive initiative, GGB will conduct periodic bottom-up assessment exercises on its corporate loans in addition to the top-down approach to identify early warning signals on portfolio asset quality.

• In terms of ESG initiatives, GGB as at 1Q23 has mobilised RM28.2bil in sustainable financing cumulatively since 2021. It is on track to achieve a total of RM80bil in sustainable finance by 2025.

• The group’s foreign shareholdings have increased slightly to 17.73% as at end-June 2023 vs. 17.27% in Mar 2023.

• The stock is trading at FY24F P/BV of 1.1x, below its 5-year historical average P/BV of 1.2x and offers an attractive dividend yield of 7.8%.

Source: AmInvest Research - 25 Jul 2023