INVESTMENT HIGHLIGHTS

• PATAMI declined -4.6%yoy dragged by lower NOII.

• NII growth from lower interest expense.

• Loans growth was steady from SME and Sharia segment.

• Asset quality stable.

• No change in our forecast for Maybank Group

• Maintain BUY with unchanged TP to RM11.40 based on PB multiple of 1.6x.

Dragged by lower NOII. Maybank Indonesia posted 1HFY18 PATAMI of IDR970.3b which was -4.6%yoy lower. The decline in PATAMI was due to lower NOII, which fell -27.2%yoy to IDR1,032b. The lower NOII was mostly due to decline in fees and commission, forex gains and other fee income. These fell -1.3%yoy, -58.5%yoy and -28.5%yoy to IDR186.1b, IDR45.6b and IDR800.7b respectively.

Resilient NII despite NIM compression pressure. Meanwhile, NII grew +2.5%yoy despite the compression pressure to NIM in Indonesia, stemming from the rate hikes. This was due to lower interest expense which fell -4.6%yoy to IDR3,383b. The decline was faster than the decline in interest income which contracted -0.9%yoy to IDR7,315b.

Lower OPEX and lower provisions moderated the decline. OPEX fell -5.5%yoy due to lower general and admin cost. This declined - 7.1%yoy to IDR1,701b. Provisions were lower by -15.2%yoy to IDR676.3b.

Stable loans growth. Gross loans growth as at 2QFY17 came in at a decent +3.7%yoy to IDR114.1t. This was mainly contributed by growth in the SME and Shariah segment, where it grew +2.4%yoy to IDR19.6t and +64.3%yoy to IDR23.0t respectively. This moderated by decrease in auto (-22.6%yoy to IDR8.55t), mortgage (-25.0%yoy to IDR7.96t) and corporate (-6.2%yoy to IDR20.5t).

Asset quality improved. NPL fell by -19.1%yoy to IDR3.20t. This was mainly due to lower NPL in foreign currencies loan, which contracted -64.9%yoy to IDR623.4b.

Lower deposits. Total deposits contracted -4.9%yoy to IDR118.0t. On the bright side, this was due to -11.9%yoy decline in time deposits to IDR68.6t, which is more expensive. CASA increased +6.9%yoy to IDR49.4t, which partly explains the fall in interest expense.

FORECAST

Pending the announcement of the Group's 2QFY18 result, we make no change to our forecast for now.

VALUATION AND RECOMMENDATION

We believe that the result from Maybank Indonesia will not be a significant drag to the Group’s overall 2QFY18 result. We believe that the fundamental of the Group remains intact. Although, we have seen possible headwinds in term of asset quality and NIM, coupled with the uncertainty in Malaysia following GE14, we believe that the Group will be able to maintain its earnings growth trajectory. Hence, we are maintaining our BUY call with unchanged TP to RM11.40 based on PB multiple of 1.6x.

Source: MIDF Research - 31 Jul 2018