Results

• In line with expectations. Posted 3Q16 net profit of RM1.79bn (-5.4% YoY, +25.9% QoQ), bringing 9M16 net profit to RM4.38bn (-15.5% YoY), in line with ours, but below consensus estimates, accounting 73.1% and 68.6% full-year forecasts respectively.

• Abated loan loss coverage, higher writeback, slower R&R and improving GIL were the key themes for 9M16 results.

Deviations

• None.

Dividend

• No dividend was declared in this quarter, YTD dividend stood at 20 sen vs. 24 sen in 9M15.

Highlights

• Management slashed FY16 guidance given subdued 9M16 performance. ROE cut to 10.5%-11% vs. 1%-12%; loan growth revised to 2%-3% vs. 8%-9% where Malaysia loan guidance cut to 4%-5% vs. 8%-9%; and deposit growth revised to 3%-4%.

• 3Q16…. Net profit rose to RM1.79bn (-5.4% YoY, +25.9% QoQ), chiefly from NOII (+10.8% YoY, +1.4% QoQ), including trading of treasury products (+176% YoY) which offset the plunge in forex income (-324.7% YoY). Provision slowed to –RM370m due write back and recovery amounting to RM77.2m and RM122m respectively. GIL ratio improved to 2.22% due to lower R&R accounts. There was higher writeback of accounts in Malaysia and Indonesia in O&G and steel sectors thus lowering credit cost to 64bps. Maybank’s exposure to O&G /agriculture/ metal and mining sectors stood at 4.3%/1.6%/1.5%, respectively.

• 9M16…. Net profit grew to RM4.38bn (-15.5% YoY) due to lower base in 2Q16 (higher provision and impairment incurred during 2Q16 amounting RM1.1bn). CTI was contained below 50% despite absolute expenses rising by 5.8% on the back of higher personnel cost.

• Loan base inched up to RM461.2bn (-0.7%YoY, +2.2% QoQ). In 9M16, international market dragged Maybank loans by -5.6% YoY while domestic loans grew modestly by 2.9% YoY. However, Indonesia showed encouraging signs by posting growth both QoQ and YoY.

• Deposits fell 0.4% QoQ as a deliberate effort to reduce exposure in expensive deposit from Malaysia, whilst CASA continued to thrive, bringing LDR back to 90%.

• Management reiterated credit cost at 50bps for full year target. That said we could see improving credit cost in 4Q16 given YTD stood at 64bps. Improvement would come from ongoing writeback and recoveries.

Risks

• Unexpected jump in impaired loans, lower than expected loan growth and significant slowdown in capital market.

Forecasts

• Unchanged.

Rating

BUY ( ↔ )

• While results were modest, we believe the asset quality issue will recede in next quarter due to efforts in recoveries and this would help clear the air and support its share price.

Valuation

• BUY rating is maintained with unchanged TP of RM8.51 derived from ROE and WACC of 10% and 8.8%.

Source: Hong Leong Investment Bank Research - 25 Nov 2016