• Malayan Banking Bhd’s (Maybank) Indonesian subsidiary, Maybank Indonesia recorded a lower net profit of Rp450bil in 3QFY17 (-11.4%QoQ). This led to a 9MFY17 net profit of Rp1.4tril which grew 12.0%YoY. The improvement in cumulative earnings was supported by higher net interest income (+4.3%YoY), rise in non-interest income (+7.9%YoY), lower provisions (-15.1%YoY), partially offset by an increase in operating expenses of 8.4%YoY.
• 9MFY17 NIM saw an increase of 9bps YoY to 5.18% (9MFY16 NIM: 5.09%) due to disciplined loan pricing and active management of funding cost. Maybank Indonesia's gross loans picked up paced and grew 1.5%QoQ and 4.6%YoY in 3QFY17. On a year-onyear basis, the improvement in loan growth was contributed by a stronger growth in Global Banking loans of 29.0%YoY and Non-Retail Community Financial Services (CFS) Banking Loans, comprised of Micro, Small & Medium Enterprises (SME) and Business Banking credits, which grew 3.4%YoY. Meanwhile, Retail loan growth remained subdued at - 6.0%YoY with stiff competition on loan pricing and slower pace of consumer spending in Indonesia. Sharia banking loans continued to grow strongly by 50.5%YoY.
• Maybank Indonesia’s non-interest income for 9MFY17 rose 7.9%YoY, largely due to higher gains from sale of trading securities and financial investments (+306.6%YoY).
• We estimate Maybank Indonesia's earnings to contribute circa 9.1% of the Group's PBT in 9MFY17 based on our FY17F earnings forecast for Maybank Group.
• Gross NPL ratio of Maybank Indonesia trended higher to 3.87% in 3QFY17 vs. 3.56% in 2QFY17. Meanwhile, net NPL ratio remained stable at 2.39% in 3QFY17 (2QFY17: 2.40%). On QoQ basis, absolute NPLs rose by 10.9% in 3QFY17, contributed by mainly by rise in loans to mining and manufacturing sectors which were classified as non-performing. On the comfort note, provisions declined by 9.7%QoQ in 3QFY17 and by -15.1%YoY for 9MFY17. 9MFY17 credit cost stood at 1.46% vs. 1.81% for 9MFY16.

• Maybank Indonesia remained conservative over the management of its asset quality as it highlighted that economic conditions in Indonesia continued to be challenging.

• CASA ratio was steady at 38.0% as at end of 9MFY17. Maybank Indonesia continued to focus on cash management and digitations of its banking services, which will be beneficial to raise its CASA and further improve its liquidity.

• We maintain our HOLD recommendation on Maybank with an unchanged fair value of RM9.10/share based on a FY18 ROE of 10.7%, leading to a P/BV of 1.3x.

Source: AmInvest Research - 31 Oct 2017