- We maintain our HOLD rating on Malayan Banking Bhd (Maybank), with an unchanged fair value of RM10.30/share. This is based on an unchanged ROE of14.2% FY13F, leading to a fair P/BV of 1.9x.

- Maybank’s annualised net earnings for 2QFY13, came in at 2.2% below our estimate and 0.9% below consensus’ estimate. We deem the net earnings to be in line. The 1H made up 48.4% of ours and 49.1% of consensus FY13F net earnings forecasts.

- Group loans growth was better with annualised loansgrowth of 9.2% in 2QFY13, ahead of 1QFY13’s 5.8%. Growth was largely driven by the consumer and SME segments, while the corporate loans segment remains muted. However, the company alluded that growth is likely to pick up ahead with likely disbursements of ETPrelated loans.

- Non-interest income did well in this quarter with a substantial 22.9% QoQ rise in 2QFY13 (1QFY13: 17.8% QoQ). The strong growth came from unrealised forex gain arising from translation of its USD assets, while there were further gains on sale of securities.

- More importantly, we understand that the company has continued to take profit on some of its securities portfolio earlier, and has switched to shorter tenured duration for its securities held-for-trading. Thus, looking ahead, the company does not expect to incur any material marked-to-market losses for its trading book portfolio. In addition, the company hinted at the briefing that it views the current market volatility as a good opportunity to accumulate for longer-term positions.

- Credit costs was higher at 52bps in 2Q (1QFY13: 11bps), which is largely to provide for earlier impaired loans in 1Q. However, asset quality remains stable with no major strains detected in any particular parts of its portfolio. Loan loss cover has also risen back to above 100% at 103.5% in 2QFY13 from 99.2% in 1QFY13. We are more comfortable with the loan loss provisioning stance and asset quality trend.

- All in there were good vibes with further clarity from the briefing, given loans growth expected to pick-up, much less likelihood of marked-to-market losses for its securities portfolio and stable asset quality.

- The only deterrents to a possible upgrade in our rating are due to non-recurrence forex gain as well as possibility of lesser securities gains in FY14F. We expect share price to hold up well given limited downside to net earnings. We maintain HOLD.\

Source: AmeSecurities