Maybank reported a better 2QFY23 net profit of RM2.34bn (+45.4% YoY, +3.2% QoQ), as the current quarter saw a notable jump in non-interest income contributions (+>100% YoY, +45.7% QoQ). Cumulative 1HFY23 net profit of RM4.61bn (+26.0% YoY) is within our and consensus expectations at 48% and 49% of respective full-year numbers, which leads us to keeping estimates unchanged on expectations of steadier operational performances ahead despite uncertain external conditions. Near-term challenges notwithstanding, we continue to like the Group’s prospects, underpinned by its M25+ initiatives. Our Outperform call and TP of RM9.70 are retained.

• Net fund based income declined 4.4% YoY to RM9.62bn for 1HFY23, primarily due to net interest margin (NIM) compressions as deposit competition was more intense than anticipated. Year-to-date annualized NIM fell 22bps to 2.16% for the period. Encouragingly however, QoQ trends show a slowing in margin compression (1QFY23: 2.19%, 2QFY23: 2.14%). Amid continued pressures on funding costs, management has revised NIM compression guidance to ~25bps this year (from 5bps to 8bps previously). Focus will be maintained on the community financial services segment, while defense of CASA balances will be via non-rate propositions meanwhile.

• Non-interest income was 39.1% higher YoY to RM4.17bn for 1HFY23, with treasury- and market-related income growing more than 100% to RM2.2bn (1HFY22: RM0.99bn). Foreign exchange profit was up >100% to RM1.09bn, gains in investment and trading income clocked-in at RM0.42bn (1HFY22: loss of RM0.04bn), while net realized derivative gain of RM0.07bn (1HFY22: unrealized loss of RM1.02bn) was seen, amongst others.

• Loans growth was unchanged at +5.3% YoY, with the international portfolio (+7.4%) making more headway, albeit with a smaller share (40%) of the credit book. Business in Malaysia (+3.9% YoY) was underpinned by the mortgage (+7.3%), auto (+9.2%), credit card (+15.9%) and SME/business banking (+7.8%) segments. Indonesia (+2.2% YoY) was driven by auto loans (+27.4%) and credit cards (+21.8%) meanwhile.

• Asset quality remains under control, with no further surprises this current quarter. Net impairment losses are 50.5% lower to RM867.4m following a net write-back in financial investments of RM78.7m (1HFY22: allowance of RM448.5m), and lower loan loss provisions. Loan loss coverage is steady at 130.3% (1QFY23: 133.5%), with formation of newly-impaired loans remaining relatively low. Management has lowered the net credit charge-off rate guidance to between 30bps and 35bps meanwhile (35bps-40bps previously), with renewed focus on recovery efforts and quality management.

Source: PublicInvest Research - 1 Sept 2023