- We maintain our HOLD rating on Malayan Banking Bhd (Maybank), with an unchanged fair value of RM9.90/share. This is based on an unchanged higher ROE of 13.5% for FY14F, and an unchanged fair P/BV of 1.8x.

- Maybank’s 1QFY14, if annualised, was marginally below our forecast by 2.7%, but was 6.0% below consensus’ estimate of RM6,817mil for FY14F.

- The 1Q made up 24.3% of our and 23.5% of consensus’ FY14F full-year earnings.

- Annualised loans growth was muted at 5.3%, below the group’s loans growth target of 13.0% for FY14F. Besides generally slower consumer loans, Maybank said that global wholesale banking division (primarily corporate loans)’s loans growth was slower, as it experienced higher repayment, foreign currency translation effects, and price competition for its trade financing division.

- Annualised deposit growth was also flat at 0.05%, which is below the group’s deposit growth target of 13.0% for FY14F.

- The company hinted at much tighter deposit trend for the industry in 1Q, with a more challenging competitive environment for the non-consumer segment. This is due to more intense price competition for the corporate deposit, where it has seen higher rates for cash rich corporate, and interest rates now being offered for current accounts.

- We estimate a higher LDR ratio at 92.5% in 1QFY14 from 91.3% in 4QFY13. This was attributed to greater competition for deposits in the industry.

- There was an uptick in absolute gross impaired loans balance, at 3.7% QoQ in 1QFY14, against a large 13.7% QoQ drop in overall balance in 4QFY13. These came from a couple of domestic corporate accounts, and coal- and commodity-based corporate accounts in Indonesia.

- The company is relatively cautious; it indicated a slowdown in consumer demand as well as tighter deposit competition. However, it is maintaining its targets for FY14F.

- It expects the fee income portion of its business, particularly the investment banking pipeline, to pick up in 2H.

- The 1Q indicates some deceleration in the top line. We maintain HOLD.

Source: AmeSecurities