Maybank’s 4Q21 bottom-line was up 34% YoY due to lower loan loss provision. Also, NIM widened sequentially and loans growth quickened. However, GIL ratio experienced an uptick. Overall, results beat estimates and thus, we raise FY22- 23 earnings by 1-3%. We continue to like Maybank for its regional exposure and leadership position. Moreover, it has superior dividend yield. Besides, Maybank is least affected by the Prosperity Tax and its lower foreign shareholding level relative to other large banks, suggests the stock is under owned by foreigners. Retain BUY and GGM-TP of RM9.40, based on 1.23x FY22 P/B.

Beat expectations. Maybank posted 4Q21 earnings of RM2.1bn (+22% QoQ, +34% YoY), bringing FY21 sum to RM8.1bn (+21% YoY on a core basis, after adjusting for modification losses in 2020). This was ahead of our expectation, forming 108% of full year forecasts but came in line with consensus at 103%; key variance was from lower than-expected loan loss provision.

Dividend. Final DPS of 30sen was proposed (4Q20: 38.5sen), bringing full-year DPS to 58sen (FY20: 52sen). Ex-date TBD later.

QoQ. The 22% increase in net profit came mainly on the back of lower allowance for impaired loans (-86%). Also, it was aided by top-line growth of 2% where net interest margin (NIM) expanded 6bp while loans grew 2%. However, higher opex (+5%) and bond impairment capped overall earnings from rising quicker.

YoY. Similar to QoQ trend, the lower bad loans provision (-86%), helped bottom-line to jump 34%. Total income was flat during the quarter as NIM expansion (+17bp) and loans growth (+6%) were erased by weak non-interest income (NOII, -31%) showing across the board.

YTD. Total income growth (+2%) coupled with the 42% drop in loan loss allowances, led to the 21% spike in net profit.

Other key trends. Both loans and deposits growth gained momentum to +5.7% YoY (3Q21: +4.0%) and +6.5% YoY (3Q21: +2.8%) respectively. Sequentially, the loan-to deposit ratio (LDR) nudged up 1ppt to 90%. As for asset quality, gross impaired loan (GIL) ratio increased 6bp QoQ due some bad working capital loans in Hong Kong.

Outlook. Following seasonal deposit competition in 4Q, we expect sequential NIM to hold steady at current levels. That said, this is seen to expand when BNM hikes OPR later this year. Also, loans growth is anticipated to stay resilient, considering economic recovery. Separately, GIL ratio is likely to creep upwards but we are not overly worried as Maybank has already made heavy pre-emptive provisioning in FY20-21 and in fact, has begun to write back overlays. Furthermore, FY22 NCC assumption pencilled in by both us and consensus is still fairly elevated (above the normalized run-rate but below FY20-21’s level).

Forecast. Since 4Q21 results beat our expectations, we raise FY22-23 earnings by 1- 3% to account for lower loan loss provision.

Retain BUY and GGM-TP of RM9.40, based on 1.23x 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 0.91x. 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 - 25 Feb 2022