- We maintain HOLD on Malayan Banking Bhd (Maybank) with a lower fair value of RM9.00/share (vs. RM9.40/share previously). This is based on a lower ROE of 12.3% (12.6% previously) for FY15F, leading to a lower fair P/B of 1.5x (1.6x previously).

- We expect loan demand trend to remain generally quite muted for Maybank. While the SME, mortgage and auto loans segment is considered to be holding up well, we understand that large corporate borrowers have been holding back on capex plans and are adopting a more cautious stance due to macro factors. Thus, recent loans disbursement trend for the large corporate segment is slow. The trade finance segment has also declined and remained in soft patch.

- The bright spot is net interest margin (NIM), which had been stable in recent months. We believe this is likely due to more stable wholesale deposit funding costs. 

- As for asset quality trend, the company has continued to see sustained good asset quality so far, although it cautions it is still early days to gauge the impact from lower oil and commodity prices.

- It is maintaining its targeted credit cost at 30bps or less for FY15F. It reckons this is reflective of a normalised trend, as it expects fewer major recoveries ahead. It believes that it has extracted the bulk of the recoveries in the past two years, with major recoveries likely to taper off ahead. It reckons that in a slowdown scenario, credit costs for the industry may rise to 40bps next year.

- Based on the latest indications, we have revised our assumption in terms of NIM, to -8bps instead of -9bps for FY15F to reflect the better-than-expected wholesale cost of deposit. In addition, our credit cost assumption is raised to 26bps (from 19bps previously) for FY15F.

- All in, this leads to an about 2.5% reduction in our net earnings forecasts. 

- We expect the next quarter’s results to be subdued. Key new information from the latest visit is the better-thanexpected NIM, but this is offset by the cautious stance adopted in terms of credit cost outlook.

- Maintain HOLD.