Maybank; Buy; RM8.80
Price Target: RM10.60; MAY MK

Maybank expects a contraction of 10 bps in the group's net interest margin (NIM) in 2012. It cited price competition between banks as the reason as new loans secured at lower pricing has narrowed NIM. This is in line with our expectation as we have imputed 10bps decline in NIM in our FY12 forecasts.

Separately, Maybank said that its exposure to the USD600m (c.RM1.8bn) unsecured funding facility on which Vietnam Shipbuilding Industry Group (Vinashin) has recently defaulted is minimal and insignificant. Maybank's total assets as at Dec-11 stood at RM451bn and it has a loan loss coverage ratio of 87%. Maybank remains our top pick among the large cap Malaysian banks. Its dividend yield is appealing at c.6%, assuming a sustainable 70% payout ratio. Apart from its improving domestic business, we believe that its long-term growth potential of its Indonesian operations remains a key re-rating catalyst. Maintain Buy and RM10.60 TP.

Source: HwangDBS Research 30 March 2012