Period    3Q12/9M12

 The 9M12 PAT of RM4,285.1m came in broadly inline with expectations, making up 80% of the consensus' forecast and 82% that of ours. The revenue growth was, however, softer in 3Q12 although the continuing improvement in the credit charge-off rate brought the steady bottom line result.

Dividends   No dividend was proposed during the quarter.

Key Result Highlights  The 3Q12 net interest income grew steadily by 2.5% QoQ and 12.4% YoY to RM2,158.9m. The NIM was higher by 1bps to 2.41% given the softer 10.4% loan growth (on an annualised basis) during the quarter.  

 The loan growth momentum was softer due to the tighter market in the region. The 10.4% loan growth was hence below its FY12 KPI target of 16.2%.  The slower loan demand in Singapore and just stable growth in Malaysia were the key reasons for the unexciting loan growth. The domestic loan grew 12.4% (on an annualised basis, 2Q12: 15.8%).

 Besides the softer funding business, we also note that the 3Q12 non-interest incomes of RM1,975.6m were softer too by -5.1% QoQ after a strong 1H12 performance.   However, the 9M12 non-interest incomes of 6,086.5m were still considerably strong (+16.6% YoY) thanks to 1) stronger Kim Eng's contributions, 2) transfer profits from the surplus in the insurance division and 3) a better fee-based incomefrom the strong issuance of Islamic debt securities. As a result, the group's total income grew 14.8% YoY with fee-based incomes contributing 38.7% of the total income.  

 The 3Q12 overhead cost of RM2.04b was flat but with the lower total income, the cost-to-income ratio was higher at 49.4% (vs. 46.9% in 2Q12). 

 The NPL outstanding balance of RM5.8b was lower in 3Q12 (from RM6.0b in 2Q12) with the net impairment ratio improving 6bps QoQ to 1.22%. The annualised credit charged-off rate is estimated at only 23bps to gross loans. Loan loss coverage meanwhile was recorded at 104%. 

 In summary, the annualised 16.3% ROE has exceeded the group's 15.6% target.

Outlook   During the briefing, the management said it remained confident of their profit guidance for Malaysia and that Indonesia's strong domestic demand will continue to do well. The above factors should continue to support Maybank's balance sheet growth and profitability despite the softer momentum in our view.

Change to Forecasts  There are no changes to our earnings estimates.

Rating  Maintain OUTPERFORM

 Our OUTPERFORM rating is maintained as the current share price implies a 21% total upside (together with a 5.0% net div. yield) to our Target Price (TP).

Valuation    Our Target Price of RM10.40, based on 2.0x FY13 P/BV and implying a 14.9x FY13 PER, is retained.

Risks   Unexpected slowdown in fee incomes.

Source: Kenanga