Maybank Indo chalked in 4-fold YoY rise in net profit, given positive Jaws, lower impaired loan provision and effective tax rate. Also, loans growth and NPL ratio improved. However, NIM contracted sequentially. That said, results were in line and hence, our forecasts were unchanged. We continue to like Maybank for its regional exposure and leadership position. Moreover, it offers superior dividend yield. Besides, Maybank is least affected by Prosperity Tax and its lower foreign shareholding level relative to other large banks, hints the stock is under owned by foreigners. Retain BUY and GGM-TP of RM9.40, based on 1.22x FY22 P/B.

In line. Maybank Indonesia (79%-owned subsidiary) reported 4Q21 net earnings of IDR583bn (+6% QoQ, +4-fold YoY), bringing FY21 total to IDR1,645bn (+30% YoY). This was in line with expectations, forming 100-104% of our and consensus full-year forecasts.

QoQ. Positive Jaws from the drop in opex (-14%) coupled with the lower effective tax rate contributed to the 6% rise in net profit. Otherwise, weak revenue (-1%) and higher loan loss allowances (+76%) were drags. At the top, net interest margin (NIM) slipped 6bp sequentially but the negative impact was plugged by stronger non-interest income (NOII, +18%) across the board.

YoY. Earnings increased 4-fold, thanks to positive Jaws (total income rose 4% while opex declined 6%), lower provision for bad loans (-24%) and effective tax rate. During the quarter, NIM widened 14bp but NOII fell 5% given weaker forex gains (-53%).

YTD. The lower impaired loans provision (-26%) and effective tax rate were more than sufficient to offset the tepid total income showing (-5% on the back of loans shrinkage and lacklustre NOII). In turn, bottom-line spiked up 30%.

Other key trends. Both net loans and deposits growth improved to -4.9% YoY (3Q21: -11.8%) and -0.1% YoY (3Q21: -12.6%) respectively. As such, sequential net loan-to deposit ratio inched down 8ppt to 87%. For asset quality, gross NPL ratio decreased 91bp QoQ to 3.7%, mainly due to its manufacturing segment.

Outlook. We expect NIM to hold steady at current levels since Bank Indonesia stayed pat on its monetary policy and will only look to review the key benchmark interest rate in 3Q22; hikes will be favourable to NIM in the medium -term but loan de-risking and re-profiling activities could cap a stronger NIM expansion. As for loans growth, we see continuous recovery over the next 6-9 months. Separately, loan restructuring efforts will help to limit a significant sag in NPL ratio; Otoritas Jasa Keuangan (a government agency that regulates and supervises the financial services sector) has prolonged the loan restructuring program until Mar-23 to support troubled borrowers.

Forecast. Unchanged as Maybank Indonesia’s 4Q21 results were within estimates; it contributes c.4-5% to group’s PBT (immaterial).

Retain BUY and GGM-TP of RM9.40, based on 1.22x FY22 P/B with assumptions of 9.4% ROE, 8.2% COE, and 3.0% LTG. This is broadly in line with its 5-year mean of 1.19x but ahead of sector’s 0.92x. The premium is warranted considering its regional exposure and leadership position. Also, it offers superior dividend yield of c.7% (3ppt higher vs peers). Besides, it is one of the bank that is least affected by Prosperity Tax (%-wise) and its lower foreign shareholding level (relative to other large banks), hints the stock is under owned by foreigners.

Source: Hong Leong Investment Bank Research - 21 Feb 2022