The group's 9M12/3Q12 net profit jumped 18.2% y-o-y and 4.4% q-o-q, propelled by stable NIMs, trading gains and improved operation efficiency. With our FY12 and FY13 credit cost assumptions raised and in view of a better loan and deposit pricing discipline for FY13, we nudge up our FY12 and FY13 earnings forecasts by 5.5% and 10.1% respectively. Rolling forward our valuation to FY13, we move up our FV from RM9.87 to RM10.64 (1.96x FY13 PBV with implied 13.6x PE, ROE: 14.8%). Current valuations remain compelling at 1.65x FY13 PBV. Maintain BUY.
Above expectations. Maybank's annualized 9MFY12 net profit was in line with consensus but 7.0% above our estimates, representing 73% of consensus and 79% of our full-year forecasts respectively. 9MFY12 earnings expanded 18.2% y-o-y while 3QFY12 earnings rose 4.4% q-o-q. The group's pre-provision operating profits were equally impressive, growing by 18.3% y-o-y. The stronger-than-expected results were driven by better-than-expected net interest margin (NIM) hold-up and lower-than-expected provisions.
Firing on all cylinders. The relatively strong results were driven by: i) a 5.6% q-o-q surge in loans growth, with an accompanying 4bps uptick in sequential NIMs, i) a 14.5% growth in transaction service charges and fee income, ii) 22-fold increase in trading income, and iii) 14.9% y-o-y increase in net interest income as a result of relatively stable NIMs at 2.42% partially supported by strong sequential domestic CASA (current account, savings account) growth of 10.7% q-o-q vs industry's 6.1% q-o-q. Its domestic investment banking division also recorded a robust 54% y-o-y increase in income. As a result, the cost to income ratio dipped to 48.2% from 50.2% in 9M11 despite a 19% increase in staff cost and 11.4% y-o-y rise in overall operating cost. Net profit jumped 18.2% despite a 120.7% y-o-y increase in provisions.
Loans growth spurred by domestic consumer, Indonesia. The group's annualised loans growth of 10.4% was slightly below our full-year forecast of 11.5% due to a sequential pull-back in Singapore (-0.8% q-o-q) and lumpy corporate loans repayment in Malaysia, which resulted in a -2.6% q-o-q contraction in domestic corporate loans. Overall, its domestic consumer loans grew 13.5% y-o-y, with mortgages being the strongest driver at 15.2%, while its domestic corporate banking grew at a steady 12.4% despite a 3Q12 sequential pull-back. Loans growth in Indonesia moderated to an 17.3% annualised growth vs FY11's 28% but this was well compensated for by stronger NIMs averaging 5.76% for 9MFY12 vs 5.37% in FY11, largely owing to BII's strategy of selective growth focusing on profitability rather than volume. Meanwhile, BII's loans to deposit ratio (LDR) improved to a relatively comfortable 88.5% in 3Q12 from 2Q12's 89.4% while group LDR held steady at 90%.
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Asset quality holds firm. Overall, impaired loans improved by 4.1% q-o-q, with the group's Indonesian operations posting a 6.4% improvement while that at its Malaysian counterpart was better by 4.7%. This led to gross and net impaired loans dipping 10bps and 6bps q-o-q to 1.90% and 1.22% respectively. The decline was attributed to improved recoveries and write-offs. As a result, the group's 3Q12 and 9M12 credit costs came in at only 12bps and 23bps, significantly lower than initial guidance of 36bps for FY12. Management is now guiding for possible full-year credit costs at 20bps, implying that 3Q12's relatively low 12bps is likely to be sustained well into 4Q12. In light of the stronger-than-expected asset quality and lower provision guidance, we are lowering our FY12 and FY13 credit costs assumptions to 22bps and 20bps respectively from 30bps and 28bps.
Maintain BUY, FV: RM10.64. Upon revising lower our FY12 and FY13 credit cost assumptions and in view of a better loan and deposit pricing discipline for FY13, which translates into a 3bps increase in our NIMs assumption to 2.48%, we nudge up our FY12 and FY13 earnings forecasts by 5.5% and 10.1% respectively. This, including rolling forward of our valuation metrics to FY13, prompts us to revise upwards our FV from RM9.87 to RM10.64 (1.96x FY13 PBV with an implied PE of 13.6x, ROE: 14.8%). The counter's current valuations remain compelling at 1.65x FY13 PBV, 11.5x PER backed by an attractive FY12/FY13 gross dividend yield of 6.1%/7.0% Maintain BUY.