• PATAMI grew +16.3%yoy from NII growth and lower provisions

• NII growth from lower interest expense

• Loans growth contributed by corporate and Islamic loans.

• Asset quality stable

• No change in our forecast for Maybank Group

• Maintain BUY with unchanged TP to RM10.30 based on PB multiple of 1.4x

Continuing double digit PATAMI growth. Maybank Indonesia posted 1HFY17 PATAMI growth of +16.3%yoy to IDR998.5b due to the strong NII growth and lower provisions. However, this was moderated by higher OPEX. CI ratio increased from higher general & admin (+16.5%yoy) and personnel cost (+2.9%yoy).

NII growth came mainly from better funding management. NII grew +7.0%yoy to IDR3.84t. We believe that this was due to better funding cost management given that interest income was flattish at +0.4%yoy to IDR7.38t. Interest expense fell -5.8%yoy to IDR3.55t despite fixed deposits (+8.6%yoy to IDR75.1t) growth vs. CASA decline (-0.4%yoy to IDR44.8t).

Loans growth contributed by corporate and Islamic loans.

Gross loans growth as at 2QFY17 was slightly slower at +1.3%yoy (vs. +3.2%yoy as at 1QFY17). This was due to decline in loans from auto, mortgage and credit card segment at -15.5%yoy, -14.6%yoy and - 9.2%yoy respectively. However, this was moderated by loans growing in the corporate (+38.9%yoy) and Islamic banking (+68.2%yoy) segments. We believe that the decline in some key segments may be due to portfolio rebalancing, possibly to preserve asset quality.

Stable asset quality. Asset quality was maintained with consolidated NPL level as of June 2017 remaining at 3.6% and 2.4% for gross and net respectively, when compared with the previous corresponding period. It was also able to reduce provision expenses by -15.7% to IDR835.8b in June 2017.

FORECAST

Pending the announcement of the Group's 2QFY17 result, we make no change to our forecast for now.

VALUATION AND RECOMMENDATION

We believe that the result from Maybank Indonesia will continue to provide a boost to the Group’s result. We were pleasantly surprised by the decline in interest expense despite lower CASA. Taking everything into consideration, we are optimistic on the Group’s prospect for the rest of FY17 given that we expect lower provisions and the potential to maintain the momentum of loans growth and quality deposits growth. While the expected total return is currently below our threshold of +15%, we are making an exception in this case pending for the Group's 2QFY17 result. For now, we maintain our BUY call with unchanged TP of RM10.30 as we peg FY18 BVPS to 1.4x.

Source: MIDF Research - 28 Jul 2017