Results

• In line. 4Q17 net profit of RM2.13bn (-9.7% yoy, +5.2% qoq) took FY17 net profit to RM7.5bn (+11.5 yoy). The results were in line with expectations, accounting for 105% and 100% of HLIB and consensus full year forecast.

Deviations

• Broadly in line.

Dividend

• Declared final interim dividend of 32 sen, bringing FY17 dividend to 55 sen, translating to 75% payout and 5.2% dividend yield.

Highlights

• 4Q17. Total operating income was flat at RM6.0bn (-0.7% yoy), as higher NII (+3.2% yoy) was weighed down by lower NOII (-9.1% yoy). However, higher operating income and contained loan loss provision (LLP, -67.6% yoy) was more than offset by higher opex (+11% yoy), resulting in 4Q17 net profit declining by 9.7% yoy.

• 12M17. Despite higher opex (+8.1%), Maybank posted a record high net profit of RM7.5bn (+11.5%), supported by higher operating income (+5.4%) and easing LLP (-30.8% yoy).

• Muted loan growth. Loan growth was muted at 1.7% yoy, derailed by ex-Malaysia loan growth (-2.9% yoy) whilst domestic loan growth was robust at 5% yoy (supported by a 7.6% and 5.3% rise in mortgage and hire purchase segments). Key market loan growth namely Singapore was still healthy at +4.3% yoy whilst Indonesia slowed to +3.6% yoy.

• Deposits weaker too. Deposits have yet to recover, growing by only by 1.8% yoy (vs. 5.2% yoy in FY16). The overall deposit growth was supported mainly by domestic deposits growth (+5.6% yoy). On a more positive note, CASA grew 130bps to 37.3%, largely from Malaysia and Indonesia. Given weak deposits and loan growth, LDR was flat at 93.8% (vs. 93.9% in FY16).

• NIM. Following 2 consecutive quarters of compression, NIM rose marginally by 1bps qoq to 2.36% on the back of healthy CASA growth, better loans yield and the impact of assets-liabilities management strategies.

• Credit cost. Maybank’s 4Q17 LLP declined by -67.6%, thus lowering 4Q17 credit cost to 4bps as a result of lower CA. FY17 credit cost lowered to 39bps, within management guidance.

Risks

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

Forecasts

• We fine tune our FY18 earnings (+4.2%) to reflect higher NII (on healthy NIM) and lower credit cost assumption (in line with management guidance).

Rating

BUY ( ↔ )

• Maybank delivered robust earnings in FY17. Given their well 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

• Post earnings adjustment, we raise our GGM-derived TP to RM11.00 (based on COE 10.9% and WACC of 8.6%). Maintain BUY.

Source: Hong Leong Investment Bank Research - 1 Mar 2018