1HFY21 PATAMI of RM4.36b (+46% YoY) is broadly within estimates with the anticipation that 2HFY21 could slump from heavier provisions being booked and slower pace of economy recovery. Meanwhile, a 28.0 sen interim dividend declared is within expectations. All in, we still like MAYBANK for its solid fundamental positioning and capabilities with a strong dividend cushion amidst uncertainties. Maintain OUTPERFORM with a GGM-derived PBV TP of RM10.65.

1HFY21 broadly within. 1HFY21 reported PATAMI of RM4.36b is broadly within expectations, making up 56%/55% of our/consensus full-year estimates. 2HFY21 is expected to be weaker owing to lumpy provisioning in light of the softer economic conditions in addition to modification losses from the reintroduced blanket moratorium. A 28.0 sen interim dividend was declared, which we deem to be within our anticipated full-year total of 56.0 sen (80% payout, above the 40-60% policy).

YoY, 1HFY21 total income came in at RM13.0b (+5%). NII was lifted by 15% on more buoyant NIMs (est. 2.38%, +26 bps) thanks to lower cost of funds. However, NOII declined by 17% YoY absent any strong disposal gains as in the prior year coupled by greater insurance expenses. While operating expenses were flattish, the higher income brought CIR to 44.2% (-1.5ppt) with PPOP rising by 8%. On the flipside, a 49% reduction in impairments was a benefit of pre-emptive provisioning already incurred in 4QFY20, with credit cost registering at 52 bps (-52 bps). Ultimately, 1HFY21 PATAMI came in at RM4.36b (+46%).

QoQ, 2QFY21 total income was softer by 10%, mainly dragged by poorer NOII (-41%) mainly owing to poorer returns from the insurance business. Meanwhile, NII gained 4% thanks to lower overall cost of funds. Despite impairment allowances easing by 38% on provisioning buffers, 2QFY21 PATAMI declined by 18% on the back of the weaker top-line performance.

Key briefing highlights. A more cautious tone will be taken in 2HFY21 as the implemented lockdown have resulted notable economic repercussions. The group’s local targeted assistance mix now stands at 27% in Aug 2021 (16.9% in May 2021) which is also no thanks to the new opt-in blanket moratorium introduced in Jul 2021. As daily Covid-19 cases remain at alarming levels in spite of progressively climbing vaccination rates, economic risks still loom as necessary restrictions could be reintroduced for public safety and might not translate favourably to the overall economy. With this, management aims to keep its credit cost guidance of 70-80 bps (annualised YTD: 52 bps) in anticipation of loftier provisioning and overlays where required. As a consolation, as CASA-to-deposit levels continue to creep above the 40% mark, this should translate to better NIMs in the immediate future. Meanwhile, all its guidance numbers are maintained for now.

Post results, we maintain our FY21E/FY22E earnings for now.

Maintain OUTPERFORM and TP of RM10.65. Our TP is based on an unchanged FY22E GGM-derived PBV of 1.37x (1SD above 5-year mean). We continue to position MAYBANK with its most favourable risk-to-reward profile coupled with the highest dividend yield (6-8%) in the industry paired by solid ROE prospects. Its market leading position in loans and deposits should prove beneficial in an economic recovery phase while its CASA levels would ease access to funds.

Risks to our call include: (i) higher-than-expected margin squeeze, (ii) lower- than-expected loans growth, (iii) worse-than-expected deterioration in asset quality, (iv) further slowdown in capital market activities, (v) adverse currency fluctuations, and (vi) changes in OPR. EBITDA: medium single digit decline (flat-low single digit decli

Source: Kenanga Research - 27 Aug 2021