- Based on our recent company visit, we understand that recent retail loans remain stable. However, corporate and ETP-related loans have been soft. This is in-line with industry trend, which is likely caused by a temporary pause before the general election.

- What is positive is that the drawdown plans for these corporate and ETP-related loans look firm for May and June, indicating a stronger loans outlook for 2QFY13. Besides this, Maybank’s non-GLC related loans have shown some pick-up in March 2013, compared to a soft January-February 2013 period. Loans growth target is still at 12% for FY13F.

- Net interest margin is likely to be lower in 1QFY13 due to a couple of reasons. The first is likely due to higher funding costs, caused by stiffer competition for deposits. Secondly, there were also adjustments to maturity tenures for certain consumer loan segments, prompted by changes in consumer behaviour. With a shorter maturity estimate, the effective interest rate is expected to be reduced. The previous review was a year ago in 1QFY12. On the whole, the company is maintaining NIM target at -10bps YoY for FY13F. Non-interest income is expected to be soft as well, with the fee-related portions likely to decline due to slower loan disbursements.

- In the asset quality, we believe there are likely to be a couple of medium-sized newly impaired loans, with one likely in the domestic-oriented segment and the other in the exports segment. Nevertheless, Maybank expects credit cost to be below the target of 30bps for FY13F. We believe this is due to a higher collateral value for the newly impaired loans.

- Additionally, Maybank believes that its current capital is sufficient to fund an organic growth of 12% per annum. In a probable local incorporation of its Singapore operations, Maybank is now consulting with a couple of advisers on the best structure, on whether it would just be the retail portion or with the global wholesale banking division included. Nevertheless, Maybank hints that there is no requirement for additional capital unless there is an M&A in Thailand, for example, or unexpectedly more stringent requirements for the locallyincorporated operations in Singapore.

- We believe Maybank is likely to target a dividend payout ratio above its official 40% to 60% policy, based on continuing support for its DRP plans from shareholders. The visit hinted at slow revenue in 1Q, with an unexpected slowdown in corporate and ETP-related loans and a fresh uptick in impaired loans. The good news is continuing low credit cost, and cautious reassurance on capital. Maintain Hold on Maybank.

Source: AmeSecurites