Maybank’s 9M18 net profit of RM5.78bn came within expectations, representing 72% and 73.5% of our and consensus full-year forecasts. Loan decelerated to 4.5% YoY vs. 4.6% YoY in 6M18. Customer deposits eased to 3.8% YoY (5.5% YoY in 6M18) on the back of weaker all market deposits accumulations. GIL ratio continued on upward trend, attributed to the weaker GIL in Singapore and Indonesia. No change to our forecasts, Maintain HOLD at TP of RM10.00, based on GGM- (COE 11.3% and WACC of 8.8%).

Results in line. 3Q18 net profit of RM1.95bn (-0.1% QoQ, -3.5% YoY) took 9M18 net profit to RM5.78bn (+7.4%). The results came in within expectations, accounting for 72-73.5% of our and consensus full-year forecasts.

QoQ. Net profit moderated marginally by 0.1% as slower loan loss provision (-18.1%) was more than negated by subdued operating income (caused by weak NOII arising from lower forex income).

YoY. Despite lower loan loss allowance (-28.1%), net profit eased by -3.5% on the back of weaker NOII (-16.1%).

YTD. 9M18 net profit advanced by 7.4% to RM5.78bn assisted by (i) higher net interest income by 2.2% YoY (ii) lower opex (-3.9%) and (iii) lower loan loss provision (-14.2%).

Loan growth. Loan decelerated marginally to 4.5% YoY in 3Q18 (vs. 4.6% YoY in 2Q18). The growth was led by ex-Malaysia loan growth of 4.7% YoY especially by Indonesia loan growth of 7.1% YoY (vs. 3.1% YoY in 2Q18) while Malaysia loan growth softened to 4.9% YoY (vs. 6.1% YoY in 2Q18). Malaysia loan growth was distorted by global banking loan growth, eased to 1.3% YoY (vs. 4.6% YoY in 2Q18).

Deposits. Customer deposits eased to 3.8% YoY (vs. 5.5% YoY in 2Q18) on the back of weaker market deposit accumulations across all countries). We note that deposit growth in Malaysia operations decelerated to 6.7% YoY (from 10.1% YoY in 2Q18). Despite weaker total deposits, CASA ratio (including investment account) stood unchanged at 35.1%. NIM declined by 1bps QoQ to 2.32% as it was building up liquidity buffer since 2Q18. As a result, Maybank revised its targeted NIM to flat or marginal compression in FY18 (from 5bps expansion previously).

Asset quality. GIL ratio remain on an uptrend, attributed to the weaker GIL in Singapore and Indonesia, which rose to 3.7% (from 3.68% in 6M18) and 4.13% (from 4.05% in 6M18). Credit charge declined to 41bps in 9M18 vs. 44bps in 1H18 due to lower provision.

Forecast. We Leave Our Forecasts Unchanged.

Maintain HOLD, TP: RM10.00. Although its annualised ROE is nearing its 11% guidance, we believe uncertainty in provision will pose a risk to Maybank earnings delivery in FY18. We maintain our HOLD rating on Maybank with unchanged TP of RM10.00 based on GGM of (i) COE 11.3% and (ii) WACC of 8.8%).

Source: Hong Leong Investment Bank Research - 30 Nov 2018