- We maintain our HOLD rating on Malayan Banking Bhd (Maybank), with an unchanged fair value of RM9.80/share. This is based on a lower ROE of 13.3% for FY14F, leading to a reduced fair P/BV of 1.7x.

- Maybank’s 9M net earnings made up 76.0% of ours and 77.0% of consensus forecasts, with annualised 3Q net earnings topping our and consensus estimates by 3.5% and 4.9% respectively.

- The main variance is the insurance division, which recorded a higher net income (premiums net of claims) of RM265.2mil in 3QFY13, compared to RM37.4mil in 2QFY13. This was attributed to recognition of earlier good gains on investment securities under its insurance division. In addition, there was also better forex gain in this 3Q.

- Group loans growth registered an annualised growth of 9.3%, below the targeted 12%, due mainly to large corporate lumpy repayments. Excluding the lumpy repayments, annualised loans growth would be at 11%.

- Non-interest income slid by 11.8% QoQ in 3QFY13, due mainly to marked-to-market (MTM) positions of its securities portfolio, offset by good forex gain.

- The company is now slightly more cautious, indicating that it expects a more challenging operating environment due to ongoing concerns over the impact of QE tapering.

- In terms of capital market activities, while it has experienced delayed pipeline due to market uncertainties in 3Q, the company alluded to a much stronger pipeline ahead with more IPO activities expected in 4Q.

- 3Q trend is slower in terms of loans growth, marked-tomarket losses for its investment securities portfolio, softer investment banking operation, as well as ongoing uptick in working capital impaired loans. Otherwise, the company did well in terms of CASA deposit growth.

- Earnings base appears to be quite resilient in 3Q, although we see limited earnings upgrade opportunity for now. We maintain HOLD.

Source: AmeSecurities