- 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%, which leads to a fair P/BV of 1.7x.

- Maybank has just launched a fixed deposit campaign offering attractive rates of up to 3.94% per annum (p.a.).

- The campaign requires a minimum deposit of RM10,000 for individuals or RM25,000 for SME/Business Banking customers to be placed for a 6-month period, at a rate of 3.85% p.a. This is higher than Maybank’ prevailing board rate of 3.25% p.a.

- Subsequently, the next rollover (1st rollover) for the deposit will be for the next 9 months, at a rate of 4.00% p.a. Again, this is higher than Maybank’s prevailing board rate of 3.25% for the 9-month fixed deposit tenure.

- The effective campaign rate for the 15 month placement is 3.94% p.a. This makes it much better than the industry average of 3.30%.

- Upon maturity (after the completion of the 1st rollover), the deposit will be automatically renewed for 9 months tenure at Maybank’s prevailing board rate.

- The campaign is valid from now until 20 November 2014, or upon receiving the overall limit, whichever is earlier.

- We think that the latest fixed deposit campaign is partly in response to other major promotions recently.

- The latest ongoing campaigns are Stanchart’s 4.25% offer for an 18-month fixed deposit tenure, Public Bank’s PB FX Xtra Campaign, Affin’s 1-year board rate of 3.70% and Hong Leong’s sub-brand’s MACH 3.85% 1-year fixed deposit rate.

- Notably, most fixed deposit campaigns involve rollovers, indicating that the banks are now trying to lock in fixed deposits, and are therefore anticipating further rate hikes ahead.

- Elsewhere, we gather that the wholesale deposit segment remained 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 ratios in the industry.

- In terms of earnings, we have tweaked our net earnings slightly to take into account the recently announced subscription rate of 84.0% for its dividend reinvestment plan (DRP). Maintain HOLD.

Source: AmeSecurities