Results

• In line... Maybank posted 3Q17 net profit of RM2.02bn (+12.9% YoY, +22.2% QoQ), li fting 9M17 net profit to RM5.38bn (+23% YoY), in line with HLIB and consensus estimates, making up 77.3% and 75.9% respectively.

Deviations

• None.

Dividend

• No dividend was declared. YTD dividend stood at 23 sen.

Highlights

• QoQ… 3Q17 net profit surged strongly by 22.2% to RM2.02bn, chiefly from lower LLP which declined to RM386m (-53.4%). Lower LLP in the quarter was driven by lower CA impairment and higher recoveries.
• YoY… Net profit soared by +12.9% premised on higher NII (+12.3%) and contribution from JV and associates by 162% to RM76.7m. However, it was mitigated by lower NOII which was dragged by net investment gains.
• 9M17… Net profit rose by +23% YoY to RM5.38bn, boosted by operating income and lower LLP. Higher operating income by +7.7%YoY was driven from higher NII of +9.9% whilst NOII was flattish at 1.9% YoY. Lower LLP emanated from higher writebacks while recoveries trended lower.
• Loans… Loan growth hit +5.3% YoY as at end Sep-17, in line with management target. In addition, domestic loan growth continued to shine with +6.6% YoY, offsetting the flat show of ex-Malaysia loan growth of +3.7% (Singapore: +4.6% YoY, Indonesia: +5.4% YoY and other markets: -6.3% YoY).
• Deposits… Deposits were subdued growing by only +2.7% YoY, derailed by deposit contraction in International market (-3.7% YoY), but cushioned by Malaysia deposits (+7.5% YoY). Weak ex-Malaysia growth lifted LDR higher to 94.0%. CASA composition was unchanged 36.8%, still one of the highest in the industry.
• Asset quality… Absolute NPL inched up by 19%, caused by Singapore NPL (+152% YoY) that sent Singapore’s GIL ratio to 2.21% (+2bps QoQ) whilst Malaysia GIL was stable at 2.06%. Nevertheless, R&R dropped to 0.32% (-5bps QoQ) and “impaired due to judgmental” also declined to 0.21% (-16bps). Exposure to O&G stabilized at 3.96% of total loans.
• Credit cost… Credit cost in 3Q17 slow down to 32bps, lifting 9M17 credit cost to 48bps, which was within management guidance. NIM rose by 12bps YTD to 2.39% as a result of higher loan and CASA growth.

Risks

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

Forecasts

• Maintained.

Rating

BUY (↔)

• We continue to like Maybank given its well-balanced exposure in both retail and corporate segments. Maybank is the front runner beneficiary and the best proxy to ride on a sustained recovery in economic growth.

Valuation

• Maintain our TP at RM10.70. Our TP is derived from GGM model based on COE 11% and WACC of 8.5%. Maintain BUY.

Source: Hong Leong Investment Bank Research - 04 Dec 2017