MAYBANK’s 9MFY23 net profit (+21% YoY) was within expectations. While NIM compression continued into 3QFY23, the group aims to focus on margin retention going forward by retaining CASA levels and limiting price competition. Meanwhile, asset quality pressures appear to be in control, but the group opts to remain mindful. Its FY23 targets remained unchanged while we tweak our earnings forecasts (-1%) from model updates. Maintain OP and GGM-derived PBV TP of RM9.95.

9MFY23 within expectations. MAYBANK’s 9MFY23 net earnings of RM6.96b made up 74% of our full-year forecast and 75% of consensus full-year estimate. No dividend was declared, as expected given that the group typically pays biannually.

YoY, 9MFY23 net interest income decreased by 4% as its 5% loans growth met heavy compression in NIMs to 2.19% (-20bps) following heightened deposits competition. Notably, this remained up to 3QFY23. Meanwhile, non-interest income grew 33% mainly thanks to better forex and investment performances. Cost-to-income ratio was higher at 47.9% (+3.0ppt) mostly from higher personnel costs due to revised collective agreements. On the other hand, credit cost improved, at 30bps (-14 bps) supported by write-backs driven by encouraging asset quality. Overall, 9MFY23 net profit reported at RM6.96b (+21%).

Briefing’s highlights. The group opines that there may be some challenges heading towards 4QFY23 earnings but is confident to meet its earlier revised targets.

1. Loans growth will be sustained by supportive retail banking businesses across its main regions. There are some hiccups seen from the group’s corporate portfolio, but this is not likely to undermine group level performance.

2. NIMs compression extended into 3QFY23 but at a contained rate of -5bps QoQ across Malaysia, Singapore and Indonesia. CASA levels were also relatively lower at 36.6% (-5.5ppt) as preference for higher yielding products remained high. That said, this is still within the group’s guided c.25bps compression for FY23 which would depend on some recovery in 4QFY23 to be met.

3. To retain NIMs, the group is focusing on CASA-retention strategies with non-rate offerings while limiting participation on deposit-price competition.

4. Although asset quality concerns are waning and reflected in a lower gross impaired loan of 1.43% (-28bps), the group still opted to maintain its management overlay of RM1.7b. This is mainly due to its primary allocation (58%) towards retail and RSME accounts likely to be still sensitive to emerging risks. That said, the group believes there is no cause of its credit cost to exceed its 30-35 bps target in the near term.

Forecasts. Post results, we tweak our FY23F/FY24F earnings by -1% each from model updates.

Maintain OUTPERFORM and TP at RM9.95. Our TP is premised on a GGM-derived FY24F PBV of 1.34x (COE: 9.9%, TG: 3.5%, ROE: 12.0%). MAYBANK is expected to demonstrate operational resilience whilst sustaining its position as the leading bank in terms of market share. We believe MAYBANK’s ability to provide the most sustainable returns via its consistent market leading dividend yields (7%−8%) warrants further accumulation of its shares.

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) slowdown in capital market activities, (v) unfavourable currency fluctuations, and (vi)

changes to OPR.

Source: Kenanga Research - 23 Nov 2023