9MFY21 PATAMI of RM6.04b (+22%) is within expectations. The impact from PEMULIH is not expected to meaningfully deter the group’s delivery of its FY21 targets, with a chance of reporting better-than- expected credit cost. We continue to prefer MAYBANK amongst its peers as a high sustainability play, paired by generous dividend yield opportunities. Maintain OUTPERFORM with a GGM-derived PBV TP of RM10.55.

9MFY21 within expectations. 9MFY21 reported PATAMI of RM6.04b, within expectations, consisting 78%/77% of our/consensus full-year estimates. No dividend was declared as expected, as the group typically pays its dividends bi-annually. We expect the group to pay c.80% of its earnings (vs 40-60% payout policy) given its average track record of 80-90%.

YoY, 9MFY21 total income amounted to RM19.15b (+4%), carried by a stronger NII (+14%) thanks to better NIMs (2.33%, +23bps) and a 4% loans growth. A higher CASA-to-deposit ratio also helped, standing at 44.5% (+3.8ppt). On the flipside, NOII softened by 20% due to poorer trading and investment performances compared to the prior year. That said, CIR improved slightly to 44.7% (-0.6ppt) as operating costs (+3%) expanded at a slower rate than income. Total allowances were 29% lower YoY on the back of healthier provisioning needs from prior pre-emptive measures. As such, annualised credit cost came in at 63bps (-26bps). This drove a 22% improvement in 9MFY21 PATAMI to RM6.0b.

QoQ, 3QFY21 total income was flattish, as a 12% gain in NOII led by derivatives was offset by poorer NII (-3%), dragged by lower NIMs (2.30%, - 12bps). Management explained that this was an impact of PEMULIH led modification losses (est. RM150m). Comparatively, provisions more than doubled (RM1.13b, vs RM525m) as more bookings were made on new reliefs. Notably, local repayment assistance rose to 30.6% in Nov 2021 (Aug 2021: 27.1%). With that, 3QFY21 PATAMI came in at RM1.69b (-14%).

Key briefing highlights. While the group will continue to be prudent with its asset quality management, it believes that it could outperform its initial credit cost guidance of 70-80bps for FY21 from staging improvements, in line with the economy reopening. However, there could be further modification losses recorded arising from URUS applications in Nov 2021. At this moment, the amount of applications under the program are manageable, with B50 customers only expected to make up less than 30% of total TRA mix. SMEs are still viewed to be a highly at-risk segment; it may contribute meaningfully as their performances could be propelled by looser movement restrictions. Meanwhile, we believe the group is in the clear to achieve its FY21 targets. Any unforeseen tightening in Dec 2021 should not meaningfully undermine its YTD progress, albeit may raise some concerns for FY22 which hinge on the continuous momentum of economic recovery.

Post results, we make some minor earnings model updates.

Maintain OUTPERFORM and TP of RM10.55. 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.

Source: Kenanga Research - 26 Nov 2021