- We maintain our HOLD rating on Malayan Banking Bhd (Maybank) with an unchanged fair value of RM10.20/share. This is based on FY15F’s ROE of 13.2%, leading to fair P/BV of 1.7x.
- We believe Maybank’s loans growth is likely to remain soft with ongoing impact from two main areas – corporate and trade finance.
- Corporate loans continued to be affected by lumpy repayments, and non-utilisation of facilities. In addition, there was a generally larger drop in trade finance utilisation, as Maybank has decided earlier strategically not to participate in the recent price competition.
- We gather that the wholesale deposit segment remains highly competitive in recent months. Thus, we expect interest expense to be higher in recent months, mainly due to the generally higher loan-to-deposit ratio in the industry.
- Maybank is maintaining its targeted NIM compression of 10bps YoY for FY14F, despite the higher costs of deposits. This is mainly due to the buffer provided in 1HFY14, whereby the total NIM drop had been quite minimal at only 3bps YTD (1QFY14; -1bps QoQ, 2QFY14: -2bps QoQ).
- Gross impaired loans trend is likely to remain benign. We also expect credit costs to be benign, as we expect a large recovery in July 2014.
- Generally, we expect the company’s recent months to reflect the industry’s lumbering uphill pace.
- Maintain HOLD.
Source: AmeSecurities
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