Investment Highlights

• We maintain HOLD on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM9.50/share. Our FV is pegged to P/BV of 1.2x, supported by FY24F ROE of 10.8%. Our 4-star ESG rating has been maintained, resulting in a 3% premium to our FV on the stock.

• We made no changes to our earnings forecast as 9M23 core earnings of RM7bil were within expectations, accounting for 75.8% of our and 75% of consensus estimate.

• In 9M23, the group’s underlying net profit grew 10.8% YoY to RM7bil. It was supported by stronger non-interest income (NOII) and lower provisions, partially offset by a decline in net fundbased income from NIM compression and higher operating expenses (opex).

• On a QoQ basis, Maybank’s recorded a subdued net profit of RM2.36bil (+0.8) in 3Q23. Net operating income was weaker due to a decline in net interest income from higher funding cost. Also, NOII was weaker in 3Q23 due to unrealised marked-to-market losses on derivatives despite core fees increasing in the quarter. Nevertheless, these were partially offset by lower opex and provisions.

• Opex were well controlled in 3Q23 after the conclusion of collective agreement (CA) adjustments for union employees in 2Q23. In 9M23, opex grew by 10.6% YoY, driven by higher personnel cost which included CA adjustments, rise in credit card-related fees from increased billings, depreciation on rights of use assets and IT expenses. This led to a higher CI ratio of 47.9% in 9M23 vs. 44.9% in 9M22, which slightly exceeded the target of 47.5% for FY23 guided by management.

• The group’s overall loan growth moderated to 5.1% YoY in 3Q23 vs. 5.3% YoY in 2Q23. Malaysian loans grew 3.7% YoY vs. the industry’s 4.3% YoY. Management alluded to a more positive momentum for domestic mortgage and mid-corporate loans which is likely to continue in 4Q23. Meanwhile, loans in Indonesia contracted by 0.3% YoY. A turnaround was seen in Singapore, which registered a modest loan growth of 3% YoY in 3Q23. We understand that this was contributed in part by refinancing of loans from other FIs.

• Group deposits grew at a faster pace of 3.5% YoY in 3Q23 vs. 2.8% in 2Q23. Growth in FDs climbed 20.3% YoY while CASA slipped 8.9% YoY, contributed by slowdowns in Malaysia and Singapore. The group’s overall CASA ratio of 38.6% in 3Q23 remained above the pre-pandemic level of 35.5% in Dec 19.

• In 3Q23, NIM slid by 5bps to 2.09% due to a higher funding cost. This was led by lower interest margins in Malaysia and Singapore. 9M23 NIM contracted by 25bps YoY to 2.14%, attributed to higher cost of funds in all home markets.

• Net credit cost of 29bps in 9M23 was within management’s guidance of 30-35bps for FY23. Net impairment losses fell by 40.4% QoQ in 3Q23 attributed to a net writeback in financial investments and lower loan provisions.

Source: AmInvest Research - 23 Nov 2023