1HFY22 PATAMI of RM3.90b (-10%) is within expectations. The group is selectively cautious with additional pre-emptive provisions on specific sectors in the recent quarter, but this should normalise in upcoming periods. Overall, we still believe MAYBANK’s operations are undeterred and growth delivery remains intact, reaffirming our view of it being a sustainable dividend yielder. Maintain OUTPERFORM and GGM-derived PBV TP of RM11.05.

1HFY22 within expectations. 1HFY22 PATAMI of RM3.90b is in line with our full-year forecast/consensus full-year estimate, accounting for 46% of earnings. An interim dividend of 28.0 sen is also within expectation, closely trailing our full-year expectation of 60.0 sen (c.80% payout).

YoY, 1HFY22 total income inched up (+2%) on the back of stronger NII (+4%) derived from a larger loans portfolio (+6%) riding on stable comparative NIMs. This cushioned the decline in NOII (-7%) following softer investment markets amidst higher volatility. Meanwhile, the greater mobilisation of business activities from regional economies reopening spurred higher personnel and administrative cost, leading to a higher CIR of 45.1% (+0.9ppt) and a flattish PPOP. Impairment-wise, the group booked larger pre-emptive provisions in 2QFY22 pertaining to the leisure and oil & gas sectors against a more cautionary outlook. However, as absolute overall provisions were still lower (- 7%), credit cost still improved at 45 bps (-7bps). Following additional bookings on other financial investments, operating profits came in 3% lower. This then translated to a softer 1HFY22 PATAMI of RM3.90b (-10%) post-higher effective tax rate from prosperity tax.

Key briefing’s highlights. The group looks to position themselves more firmly against possible uncertainties, evident by its selective pre-emptive provisioning as mentioned above. However, we expect this to normalise in the subsequent periods should conditions not worsen. For now, its RM1.73b management overlay would remain untouched for future utilisation. Meanwhile, a rising interest rate environment would continue to be a net benefit as the repricing of financing assets still outpaced deposits. This is added by the higher CASA ratio of 44.7% (+8bps) to render funding costs cheaper in the near term. At the moment, the biggest hurdle appears to be stabilising NOII performance but we see this to be an industry-wide challenge. On the flipside, the group’s repayment assistance profile continues to improve, consisting of 5.9% of its Malaysian portfolio in July 2022 (from 7.6% in April 2022). Headline FY22 targets are maintained for now as the group stays confident.

Forecasts. Post results, our FY22F/FY23F earnings are tweaked by -1%/-2% on model updates.

Maintain OUTPERFORM and TP of RM11.05. Our TP is based on a GGM derived PBV of 1.43x (COE: 9.7%, TG: 3.25%, ROE:12.5%) on our FY23FBVPS of RM7.69. Overall, we have no concerns that the stock will deviate from our growth projections in spite of being the leading bank amongst its peers. With dividend yields still expecting to trail at 7-8%, our proposition for the stock to be a long-term yield provider is affirmed at current levels. There is no adjustment to our TP based on ESG for which it is given a 3-star rating as appraised by us. MAYBANK is one of our 3QCY22 sector top picks.

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 Aug 2022