• FY16 net profit grew +71.% mainly due to higher NII, well contained OPEX and lower provisions

• CI ratio improved to 52.8% for FY16

• NIM improved +16bps yoy to 4.61%

• Decent loans and deposit growth

• Asset quality improved

• No change in our forecast for Maybank Group

• Maintain NEUTRAL with unchanged TP to RM8.10 based on PB multiple of 1.2x

Strong PATAMI growth. Maybank Indonesia posted strong PATAMI FY16 growth of +71.0%yoy to Rp1.95t. The strong performance was on the back of +10.8%yoy growth (to Rp6.61t) in NII, controlled OPEX increase (by only +1.7%yoy to Rp4.53t) and significantly lower provisions (which fell -19.4%yoy to Rp1.60t). The tight OPEX management and better NII had resulted in CI ratio improving to 52.88% from 55.06% last year.

Better funding management led to the NII growth… The strong NII growth was due to better NIM as it managed to improve the cost of funding. This was done by reducing dependencies on expensive deposits. As such, NIM improved by +16bps yoy to 4.61%. This can also be highlighted by the +4.8%yoy growth in interest income (to Rp13.5t) while interest expense fell -0.3%yoy (to Rp6.94t).

…moderating NOII decline. The strong NII moderated NOII decline of -7.9%yoy to Rp1.97t. The decline was due to lower treasury forex income.

Decent loans growth. Loans growth in FY16 was decent at +2.9%yoy which was supported by growth in Global Banking (+20.5%yoy to Rp25.8t) and Business Banking (+12.3%yoy to Rp51.5t). This moderated the -15.1%yoy drop (to Rp38.3t) in loans from Retail Banking. The drop in Retail Banking loans was due to decrease in auto loans (-26.1%yoy to Rp17.0t) and, credit card and personal loan (-12.7%yoy to Rp3.1t). The stellar loans growth performance in Global Banking was due to re-alignment and re-profiling of its portfolio implemented in the last two years.

Similarly with deposit growth. Deposits grew +3.0%yoy to Rp118.9t driven by current account growth of +26.5%yoy to Rp20.4t. The more expensive time deposits fell -1.1%yoy to Rp72.9t. As a result, CASA ratio improved by 2.6ppt to 38.7%.

Asset quality improved. Asset quality improved as reflected by the improvement in GIL ratio, which was better by - 29bps yoy and -36bps qoq to 3.54%. Meanwhile, NPL ratio also trended lower as it came at 3.42%. Comparatively, NPL ratio in 4QFY15 and 3QFY16 was 3.67% and 3.97% respectively.

FORECAST

Pending the announcement of the Group FY16 result, we make no change to our forecast for now.

VALUATION AND RECOMMENDATION

The result came in better than expected and we believe that it will give a boost to the Group’s overall FY16 result. NIM improvement was key here but management expect NIM compression in FY17. However, higher expected loans growth will compensate for the compressed NIM. We believe that its loans and deposit growth FY17 target is slightly ambitious given FY16 low single digit growth and the expectation that Indonesia’s GDP to recover only slightly. However, we believe that it is possible for loans growth to reach the lower end of its target with better export performance expected and Maybank Indonesia’s focus to support the government’s infrastructure spending. Our concern for the Group is its performance in Malaysia where loans and deposit growth remains tepid. In addition, we expect provisions will remain elevated albeit on an improving trend. Pending the result of the Group’s result next week, we maintain our NEUTRAL call with unchanged TP to RM8.10 based on PB multiple of 1.2x.

Source: MIDF Research - 17 Feb 2017