FY20 PATAMI of RM6.48b (-21%) was within expectations but a full-year dividend of 52.0sen was more generous-than-expected. The group is anticipating further impairment needs for FY21 as uncertainties persist. That said, with economic activity looking to regain its footing, we believe MAYBANK is poised to reap from its market leading position. We also anticipate dividend yields to be attractive again. Maintain OP with a higher FY22E GGM-derived PBV TP of RM9.10 (from RM8.60).

12MFY20 as expected. 12MFY20 reported earnings of RM6.48b were within expectations, making up 105%/101% of ours/consensus respective full-year assumptions. The final dividend of 38.5sen (YTD: 52.0sen) was strongly above our 22.0sen prediction as we were anticipating dividend payments to be strapped following the unprecedented FY20 market conditions from Covid-19.

YoY, 12MFY20 total operating income was flattish at RM24.76b (+0.1%) as stronger NOII (+13%) led by better insurance underwriting was met by a 5% decline in net interest income. We attribute this to the lower effective OPR (FY20 monthly avg: 2.08% vs FY19: 3.08%) undermining the group’s yield spread in Malaysia, dragging NIMs to 2.18% (-18bps). During the year, gross loans was stagnant while CASA deposits expanded by 23%. Operationally, CIR improved to 45.4% (-1.3ppt) thanks to cost prudence. With uncertainties posed by Covid-19, the group booked higher loan provisions of RM4.60b (+101%), translating to an overall FY20 credit cost of 88bps (FY19: 44bps). In total, the group was exposed to a net modification loss of RM227m. That said, asset quality still improved as GIL came in at 2.2% (-0.4pts). Mainly on the back of the abovementioned high impairments, net earnings in 12MFY20 declined by 21% to RM6.48b.

QoQ, total income rose by 4% as both net interest income and NOII benefited from better repriced books and insurance performance. Heavy provisioning continued in 4QFY20 as the group booked another RM1.50b worth of impairments to account for more management and economic overlays for vulnerable borrowers. 4QFY20 PATAMI registered at RM1.54b (-21%).

Key briefing highlights. Management is hopeful for better times going into FY21, with the group’s loans at risk under the TRA narrowing down to 15.7% of its books as of mid-Feb 2021. Management anticipates loan growth to trail in line with economic recovery but caution near-term risks are still posed locally as the MCO 2.0 is still undermining the consumer segment to some extent, translating to a credit cost guidance of 70-80bps. Barring further OPR cuts, we might have also seen the end of NIM compression as deposits have been fully repriced. Regionally, Singapore (7% of group PBT) in anticipated to recover at a faster rate than Malaysia and Indonesia given the country’s access to Covid-19 vaccines. To fuel the reinvigorate business activity, higher CIR should coincide, hence management’s guidance for a higher 46-47% in FY21 (from 45.4% in FY20). Factoring in the above, management believes that a ROE of 9% for FY21 would not be farfetched for the group.

Post-results, we tweak our FY21E assumptions by 1.2% from full-year model updates. We also factored a credit cost assumption of 70 bps, which is the lower range of management’s guidance. Additionally, we introduce our FY22E earnings of RM8.85b, which equates to a 20% YoY growth. We believe this captures the better economic prospects anticipated with Covid-19 vaccination being progressively administered and with business activities returning.

Maintain OUTPERFORM with a higher TP of RM9.10 (from RM8.60). Our TP is based on a rolled over FY22E GGM-derived PBV of 1.18x (0.5SD below 5- year mean, from 1.12x). While we capture a higher risk-free rate of 3.1% (from 2.7%), we also account for a firmer long-term ROE of 9.5% (from 9.0%) in anticipation of livelier economic conditions paired with MAYBANK’s market leadership. We also anticipate more lucrative yields (7-8%) to return based on a historical payout of 85% pencilled against our earnings estimates. EBITDA: medium single digit decline (flat-low single digit decli

Source: Kenanga Research - 26 Feb 2021