Maybank’s 4Q22 earnings rose 5% YoY due to stronger total income growth and writebacks of bad financial investments. Besides, GIL ratio improved. However, sequential NIM contracted and loans growth lost traction. Overall, results were in line and thus, forecasts were left unchanged. We find Maybank’s risk-reward profile to be balance as there are no fresh positive catalysts to spur share price upwards. Retain HOLD and GGM-TP of RM8.90, based on 1.20x FY23 P/B.

Within estimates. Maybank printed 4Q22 profit of RM2.2bn (flattish QoQ, +5% YoY), bringing FY22 sum to RM8.2bn (+2% YoY). This was within expectations, making up 99% of both our and consensus full-year forecasts.

Dividend. Final DPS of 30sen was proposed (4Q21: 30sen), bringing full-year DPS to 58sen (FY21: 58sen). Ex-date TBD later.

QoQ. The decrease in loan loss provision (-49%) and writebacks of impaired financial investments were erased by weaker total income (-7%) and higher effective tax rate (+1ppt). This in turn caused profit growth to be flattish sequentially. At the top, we saw net interest margin (NIM) compressed 3bp and non-interest income (NOII) declined 28% due to sluggish underwriting insurance business, fees, and trading performance.

YoY. Robust top-line growth (+10%) and writebacks of impaired financial investments fuelled the 5% rise in earnings. Otherwise, higher opex (+15% on the back of higher personnel and marketing costs), impaired loan allowances (doubled), and effective tax rate (+11ppt) capped bottom-line from increasing at a faster pace.

YTD. Profit was only up 2% despite total income growing 9% and allowance for loan loss decreasing 18%, due to the 21% spike in provision for bad financial investments and 7ppt increase in effective tax rate.

Other key trends. Both loans and deposits growth lost traction to +6.0% YoY (3Q22: +8.2%) and +3.5% YoY (3Q22: +4.9%) respectively. On a sequential basis, loan-to deposit ratio (LDR) stayed flat at 92%. As for asset quality, gross impaired loans (GIL) ratio fell 13bp QoQ due to write-offs and recoveries.

Outlook. We expect sequential NIM to shrink given: (i) repricing of matured deposits, (ii) CASA being utilized and substituted to FD, along with (iii) still stiff price competition for FD. Furthermore, loans growth is seen to moderate due to a softer domestic macro environment. Besides, GIL ratio is likely to climb but we are not overly worried as we believe Maybank is better equipped vs prior slumps; the large pre-emptive allowances built up in FY20-21 and 2Q22 to battle Covid-19 pandemic woes and latency in credit loss from OPR hikes, act as robust buffer to cushion for any asset quality weakness in the short-term.

Forecast. Unchanged since 4Q22 results were in line.

Retain HOLD and GGM-TP of RM8.90, based on 1.20x FY23 P/B with assumptions of 10.5% ROE, 9.3% COE, and 3.0% LTG. This is in line with its 5-year mean of 1.16x but above sector’s 0.85x. The premium is warranted considering its regional exposure and leadership position. Also, it offers superior dividend yield of c.7% (2ppt more than peers). That said, Maybank’s risk-reward profile is balanced, in our view, as there are no fresh positive catalysts to spur share price upwards. We note tailwinds which were supposed to be enjoyed by banks (like big NIM expansion, strong credit growth) over 2022-23 have instead been frontloaded to last year, turning next 10 months to be less exciting.

Source: Hong Leong Investment Bank Research - 28 Feb 2023