Maybank reported a flattish 3QFY23 net profit of RM2.36bn (+12.3% YoY, +0.8% QoQ) on a sequential basis, with lower loan loss provisions mitigating weaker net interest income contributions. Cumulative 9MFY23 net profit of RM6.96bn (+21.0% YoY) is broadly in line with our expectations at 72% of full-year numbers, though closely within consensus at 75%. Numbers were a mixed bag, with margin compressions continuing to impact fund-based income though foreign exchange gains provided mitigating support via fee-based income. Loan loss provisions were helped by write-backs meanwhile. We trim our estimates by an average of 3.5% as we make changes to assumptions in non-interest income contributions and credit costs. 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 6.0% YoY to RM14.43bn for 9MFY23, with margins compressing (~25bps, annualized) due to higher funding costs as a result of last year’s cumulative rate hikes and continued deposit competition. (1QFY23: 2.19%, 2QFY23: 2.14%). Business wise, Community Financial Services contributions rose +8.4% YoY to RM9.61bn, though Global Banking slumped 12.6% YoY to RM4.06bn.

• Non-interest income growth was a robust +37.8% YoY to RM5.95bn for 9MFY23, with foreign exchange gains (+>100% YoY to RM1.86bn) providing the biggest lift. Gains in investment and trading income was also a healthy RM0.75bn compared to RM0.04bn last year.

• Loans growth was stable at +5.1% YoY, with the international portfolio continuing to gain traction. Business in Malaysia (+3.7% YoY) remains underpinned by the mortgage (+8.9%), auto (+8.8%) and SME/business banking (+7.6%) segments. Singapore (+3.0% YoY) is supported by the corporate banking business (+6.7%). Indonesia recorded a weaker +0.9% YoY growth as headway in the community financial services business (+8.9%) was weighed by contraction in the global banking book (-10.8%).

• Asset quality indicators were also a mixed bag. Headline number for gross impaired loans ratio improved to 1.43% (2QFY23: 1.47%), though aided by write-offs and recoveries. Of some concern is the elevated incidences of newly-impaired loans (Figure 4), with strains coming from Singapore (business banking) and Indonesia (corporate banking). Loan loss coverage remains healthy at 127.1% (2QFY23: 130.3%). 9MFY23 annualized net credit cost of 31bps is within management’s unchanged guidance of between 30bps and 35bps.

Source: PublicInvest Research - 23 Nov 2023