-  We maintain our HOLD rating on Malayan Banking Bhd (Maybank) with an unchanged fair value of RM9.80/share. This is based on an unchanged ROE of 13.5% for FY14F and an unchanged fair P/BV of 1.8x.

-  Maybank’s annualised 2QFY14 came in just a tad below our forecast (-3.6%), and 8.1% below consensus’ much higher earnings estimate of RM6,888mil for FY14F. We deem earnings to be broadly in line with expectations.

-  The company declared a higher interim tax-exempt net dividend of 24.0 sen, compared to 1HFY13’s net DPS of 22.5 sen.

-  Annualised loans growth is slightly stronger at 7.2%, vs. 1QFY14’s 5.3%. Although this is still below the group’s loans growth target of 13.0% for FY14F, we do not expect any major disappointment, given the earlier indications that corporate loan segments continued to be affected by large settlements and repayments, as well as generally slower market activities.

-  Looking ahead, the company expects better a pipeline for the investment bank and corporate division in 2H.

-  NIM remained resilient, with only a 2bps QoQ drop to 2.35% in 2QFY14, from 2.37% in 1QFY14. This latest trend is thus better than the targeted NIM compression of 10bps YoY for FY14F.

-  In response to queries about its M&A stance, the company assured that it will not embark on an M&A for the sake of acquisition alone, or to meet its internal KPI target of overseas contribution to total group earnings of 40% by end-2015 (currently circa 33%). The group hinted that any possible acquisition would have to be value accretive for the group and it affirmed that it would not be interested in minority stakes.

-  While the latest earnings do not surprise on the upside, we are positive on its 2Q as all key operating lines have been highly resilient, despite the slowdown in consumer markets in Singapore, Malaysia and Indonesia, which contribute more than 90% of the group’s asset base.

-  We believe that the share price will continue to be underpinned by the upcoming interim dividend and this latest set of resilient earnings. We maintain HOLD.

Source: AmeSecurities