• NEUTRAL, new MYR10.20 TP from MYR9.80, 7% upside with c. 7% FY24F yield. Malayan Banking’s 4Q23 results are in line, while FY23 reported ROE of 10.8% is within its 10.5-11% guidance. Its lower dividend payout is a dampener but management thinks this is appropriate – given its all-cash nature and, possibly, to conserve some capital for growth (strong credit demand expected this year) as well as the impending adoption of Basel 3 reforms. On the whole, the stock has done well over the past year, but now offers limited potential upside. Its dividend yields of 6-7%, however, should appeal to yield seekers.

• 4Q22 results meets expectations with net profit of MYR2.4bn (+1% QoQ, +8% YoY) lifting FY23 earnings to MYR9.4bn (+17% YoY) – at 101% of our and consensus FY23F PATMI. CET-1 was solid at 15.3% (4Q22: 14.8%), which enabled Maybank to declare an all-cash, second interim DPS of 31 sen (4Q22: 30 sen). FY23 DPS of 60 sen (FY22: 58 sen) translates to a payout ratio of 77%, reflecting a dip from FY22’s 84.6% and the 84-92% range in the past four financial years – albeit in line with our more conservative assumption. The effective cash payout, however, was 77.4% (FY22: 76.7%).

• Results highlights. Positive takeaways: i) Robust loan growth (+4% QoQ, +9% YoY) with domestic up 5% QoQ (+7% YoY) as chunky drawdowns saw global banking loans spike up by 11% QoQ. Domestic community financial services and international loans both grew 3% QoQ; ii) non-II rose 9% QoQ on stronger insurance contribution; and iii) asset quality was healthy, with GIL declining 2% QoQ (-7% YoY) thanks to domestic, Hong Kong and Indonesia. On the flipside, NIM contracted by 4bps QoQ and opex rose 10% QoQ – partly seasonal on year-end campaigns and a slight uptick in credit cost, on higher provisions for retail and retail SME (RSME), plus newly impaired corporate borrowers.

• Outlook and briefing highlights. Maybank guided for the following for 2024: i) ROE of 11%; ii) 5bps NIM squeeze (FY23: -27bps YoY) from both asset yield and funding cost pressures; iii) CIR of <49% (FY23: 48.9%) with opex growth capped at 10%; iv) stable credit cost of 30bps (FY23: 31bps); and v) loan growth of 6-7% as it doubles down on mortgages and SME loans across the region. Global banking could be muted in 1H, but should post growth on a full-year basis. Maybank maintained its official 40-60% dividend payout policy although, in practice, is likely to maintain the all-cash payout ratio of about 77%. Lastly, the banking group continues to hang on to its MYR1.7bn in management overlays, with c. 60% allocated for its retail and Retail SME portfolios.

• Forecasts and TP. The revisions we made to our FY24-25F PATMI are minor – mainly reflecting updates post release of numbers for the full year and to take into account management’s guidance for 2024. We increase our TP to MYR10.20 from MYR9.80, mainly after updating our FY24F book value following the release of the FY23 results. There is also no change to the 2% ESG premium applied, which is based on our in-house ESG methodology.

Source: RHB Research - 29 Feb 2024