We are impressed with the strong advancement the bank is making towards its sustainable commitments (met 40-80% of 2025-30 targets despite only being in 2022). Hence, this further reaffirms our opinion and analysis that Maybank is a leader in the ESG space (see our sector report dated 14 Jan-22, titled ‘Improving ESG performance’). Overall, our forecasts were left unchanged. We continue to like Maybank for its regional exposure and leadership position. Also, it offers superior dividend yield. Maintain BUY rating and GGM-TP of RM9.70, based on 1.25x FY23 P/B.

Yesterday, Maybank conducted an Investor Day to provide progress updates on their sustainability commitments. We summarize the key-takeaways in this report.

Ahead of targets. All four of Maybank’s 2025 sustainability commitments are tracking quicker than expected: (i) mobilize RM50bn in sustainable finance (Jun-22: RM24bn, 50% met), (ii) improve lives of 1m households across ASEAN (Jun-22: 718.4k, 70% met), (iii) carbon neutral position by 2030 (Jun-22: 41% lower against 2019 baseline) and net zero carbon equivalent position by 2050, (iv) achieve 1m hours per annum on sustainability initiatives (Jun-22: 848.4k hours, 80% met).

Approach and progress on sustainable financing. 77% of the RM24bn sustainable finance achieved so far were from non-retail clients while the balance 23% were from retail. Within non-retail, >60% of the proceeds were employed to green up buildings and finance sustainability-linked real estates while for retail, >50% were deployed to affordable housing. Geographically, it was mainly from S’pore (59%) and M’sia (31%). Also, management has developed a sustainable product framework to help drive the growth of sustainable finance to meet its RM50bn target by 2025.

Pathway to reduce carbon emissions. So far, the 41% reduction in Scope 1 and 2 emissions came on the back of renewable energy certificates procurement (39%) and LED lights conversion (2%); this is well on track to meet its 50% and carbon neutrality targets by 2025 and 2030 respectively. Going forward, another 17% decline will come again from the above mentioned initiatives while the remaining will be extracted from air-cond modernization (17%), solar panels installation (4%), physical transformation (8%), along with in-setting and offset projects (13%).

Risk management. Besides, we gathered home markets/<100 clients/high ESG risk sectors (palm oil, forestry & logging, construction & real estate, power, O&G, mining) contributed 97%/70%/56% of total financed emissions. Given the high concentration mix, Maybank is taking proactive steps to mitigate tail events, such as deep customer engagement, setting limits, conduct quantitative analysis on transition & physical risks, performing scenario analysis and stress tests. Furthermore, it has established an ESG risk management framework to address ESG risk levels, governance, practices.

Forecast. Unchanged since there were no material positive/negative updates.

Maintain BUY and GGM-TP of RM9.70, based on 1.25x FY23 P/B with assumptions of 10.6% ROE, 9.1% COE, and 3.0% LTG. This is fairly in line with its 5-year mean of 1.18x but ahead of sector’s 0.92x. The premium is warranted considering its regional exposure and leadership position. Also, it offers superior yield of c.7% (2ppt higher vs peers). Besides, it has been posting relatively stronger financial metrics compared to other large-sized local banks. Overall, we like Maybank’s sustainability initiatives and we are also impressed with the strong progress it is making towards its sustainability commitments. Thus, we reckon that the bank will make further strides in posting better grades in our next ESG banking review.

Source: Hong Leong Investment Bank Research - 2 Sept 2022