- At our recent company visit, Malayan Banking (Maybank) indicated that it had seen a good pick-up in trade finance utilisation in July 2013. Loans growth trend indicators have been quite encouraging. The company believes there is an upside for corporate loans due to the Economic Transformation Programme (ETP). In addition, loans growth earlier did not really filter through to working capital and its smaller commercial segments. Thus, the company reckons there is a likelihood of further growth potential ahead.

- On Indonesia, the company believes there will be an increase in loan interest rates later, which will compensate for the recent rise in costs of deposits. The positive impact may be offset by some upticks in non-performing loans. However, generally, Maybank’s 89%-owned Indonesian subsidiary PT Bank Internasional Indonesia Tbk’s (BII) contribution still remains small at circa 7% of net earnings currently.

- Overall, the company indicated that it has not seen any major deterioration in any classes of its loan portfolio. It also hinted that it does not have any major exposure to the steel sector. Furthermore, Maybank confirmed that the freshly-impaired corporate accounts in 1QFY12 were fully provided for in its second quarter and the provisioning is based on zero collateral values, which is positive and reassuring. Credit cost guidance is maintained at 30bps for FY13F.

- On the possibility of its Singapore incorporation, Maybank indicated that it is still awaiting further updates on the new regulations. It estimated that the minimum capital requirement might be an absolute amount of SGD1.5bil.

- The company confirmed though that a possible incorporation of Singapore operations will very likely be considered as an investment in subsidiary, which will need to be deducted from the banking entity CET1 (common equity Tier 1) ratio. To recap, the bank entity’s CET1 ratio, with transitional phase-in arrangements, was 15.055% in 2QFY13. Without the transitional arrangements, bank CET1 ratio was 8.03% in 2QFY13.

- Its market share of Amanah Saham Bumiputera (ASB) financing is estimated at 57.6% as at end-June 2013. Unit trust loans amounted to RM24bil (7.3% of total gross loan), comprising mostly ASB financing. Looking ahead, we believe that the group’s main focus will be on building its regional reach and creating a more embedded and value-added regional banking business model. In all, the latest indicators from the company visit are positive in terms of a pick-up in trade finance and stable asset quality. Maintain HOLD.

Source: AmeSecurities