PT MAYBANK Indonesia (Maybank Indonesia) posted a 9M16 net profit of IDR1,293b, up by 118% YoY. As expected, no dividends were announced. Earnings forecasts for the Maybank Group are unchanged as Maybank Indonesia’s PBT contribution is immaterial (FY15: ~ 4%). Maintain TP at RM8.46 with our OUTPERFORM call reiterated.

Maybank Indonesia’s 9M16 net profit net profit spiked 118% jump YoY attributed to higher total income with lower opex and loans loss provisions. However, net profit was slower QoQ due to declining total income despite opex and allowance for impairments falling. Asset quality improved YoY but deteriorated QoQ. NIMs improved in terms of YoY and QoQ despite the cut in interest rates as lending yields outpaced cost of funds. Despite improved margins, loan growths were weaker.

9M16 vs. 9M15, YoY

• Total Income growth of +17% (9M15:+13%) was bolstered by strong performances both from Net Interest Income (NII) and Non-Interest Income (NOII) of 15% and 37%, respectively (9M15: +10% and +22% respectively). Surge in NOII was driven by bancassurance fees from its new partnership with Allianz, treasury-related fees, retail administration and other services.
• No compression seen in Net interest margin (NIM) on an annualised basis as it expanded 41bps to 4.9% thanks to better price discipline in loan pricing coupled with a decline in cost of funds (by 44bps) outpaced by the rise in average lending yields (by 24bps).
• Loans growth was slower at +3% (9M15: +7%), underpinned by the growth in the bank’s small and medium enterprises (SME) and commercial loans growth by 15% growth to Rp48.7 trillion. The slower growth was attributed to the banks’ focus on reprofiling and re-aligning its corporate portfolio to the overall strategy and by exiting loans that were not aligned to the bank’s risk appetite. Deposits grew slightly slower at +5% (9M15: +6%).
• With deposits outpacing loans growth, Loan-to-Deposit Ratio (LDR) fell 190bps to 92%. Current account & savings account (CASA) deposits fell by 130bps to 38%.
• Bearing the fruits of its Strategic Costs Management Programme, Cost-to-income ratio (CIR) fell by 8ppts to 55% as opex growth was slower at 2% vs. total income acceleration of +17%.
• Asset quality improved where gross impaired loans (GIL) fell by 19bps to 4.0% and credit cost ratio improved by 8bps to 2.0%.
• Annualised ROE was up at 10% due to strong growth in net profits and shareholders’ funds (+22%).
• Regulatory ratios Tier-1/Total Capital improved by 270bps/280bps to 13.8%/17.7%, (above the regulatory requirements of 8.5%/10.5%).

Source: Kenanga Research - 25 Oct 2016