Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM10.00/share. Our FV is pegged to P/BV of 1.3x supported by FY24F ROE of 11.1%. Our 4-star ESG rating has been maintained, resulting in a 3% premium to the FV.

• 6M23 earnings were within expectations accounting for 48.4% of our and 49.3% of consensus estimate. However, we tweaked FY23F/24F/25F earnings by -3.4%/-3.1%/-5.8% after adjusting our NIM estimates and credit cost assumptions lower.

• Maybank recorded a higher net profit of RM2.3bil (+3.2% QoQ) in 2Q23, contributed largely by stronger non-fund based income (NOII) (+62.6% QoQ) and a marginally higher growth in fund-based income, partially offset by rise in overhead expenses and provisions. NOII increased significantly in 2Q23 on the back of a higher treasury and markets income coupled with an increase in core fees due to stronger service charges and investment banking fees.

• In 6M23, the group’s net profit rose by 26% YoY to RM4.6bil. The improvement was supported by stronger NOII and lower provisions, partially offset by a decline in net fund-based income from net interest margin (NIM) compression and higher operating expenses (opex).

• Opex grew by 15.1% YoY in 6M23, driven by higher personnel cost which included collective agreement (CA) adjustments. Also increased were marketing, establishment cost, admin and general expenses. This led to a higher CI ratio of 47.5% in 6M23 vs. 44.8% in 6M22. 2Q23 saw a further increase in personnel cost due to the conclusion of the CA in May 2023. Excluding CA adjustments, growth in personnel cost would have been lower at 11.3% YoY instead of 15.5% YoY in 6M23.

• The group’s overall loan growth was sustained at 5.3% YoY. Malaysian loans grew 3.9% YoY, below the industry’s 4.4% YoY expansion. Loans in Indonesia expanded modestly by 2% YoY while the loan book in Singapore contracted by 1.7% YoY.

• Group deposit growth eased further to 2.8% in 2Q23 vs. 3% in 1Q23. FDs and other deposits recorded positive growth while CASA fell by 17.2% YoY across home markets. The group’s CASA ratio slipped to 37.7% in 2Q23. Nevertheless, it was still above the pre-pandemic level of 35.5% in Dec 19.

• 6M23 NIM contracted by 22bps YoY to 2.16% due to higher funding cost. Management alluded to a more stable NIM in 2H23 but in view of the steep compression in 1H23, the group has revised its guidance for FY23 NIM to be compressed by up to 25bps from a contraction of 5bps-8bps earlier.

• Net Credit Cost of 30bps in 6M23 Was Within Management’s Guidance of 35bps–40bps for FY23.

• An all-cash interim dividend of 29 sen/share (payout: 75.9%) were declared in 6M23, slightly higher than 28 sen/share in 6M22.

Source: AmInvest Research - 1 Sept 2023