KUALA LUMPUR (Aug 29): Malayan Banking Bhd (KL:MAYBANK) is on track for record profits, and will make close to RM10 billion this year, even as the country’s largest bank by assets turns its attention to protect margins, analysts said.

Net profit for the first half ended June 30, 2024 (1HFY2024) announced on Wednesday accounted for about 50% of the street’s full-year estimate, prompting eight research houses to raise their target prices (TPs) to catch up with the consensus.

“The group’s market share looks to widen as its registers above-industry loan growth in most key markets, and it will focus on further rationalising its margins, subject to some pinch,” said Kenanga Investment Bank, which raised its TP to RM11.30 while keeping its ‘outperform’ call.

Investors may also be in for higher returns in the near term if the bank writes back its entire overlays totalling RM1.7 billion, which could boost its profits by 17% and lift dividend payout, the house flagged.

Shares of Maybank have risen by 26% so far this year. Banking stocks have rallied this year, benefiting from a recent surge in foreign inflows as proxies to the country’s improving economic growth outlook.

There are currently 11 ‘buy’ calls on Maybank and eight ‘hold’ recommendations, with MIDF Amanah Investment Bank being the latest to upgrade the stock on Thursday. The consensus 12-month TP is RM10.99, according to Bloomberg.

“The only rerating factors that matter are foreign investor interest and dividend yields,” said MIDF, which lifted its rating to ‘buy’ from ‘neutral’.

The house noted that dividend payout will likely exceed FY2023’s 77.4%, but flagged uncertainties about Basel III implementation, difficulty in attaining cheap funding, and limited room for further risk-weighted asset optimisation due to Maybank's high concentration of residential mortgages.

Maybank has guided for slower loan growth in 2HFY2024, amid intense competition for deposits. Its net interest margin - a measure of profitability from interest charged on loans after paying returns on deposits - declined 15 basis points year-on-year in the second quarter ended June 30, 2024 (2QFY2024).

For 1HFY2024, net profit rose nearly 9% to RM5.02 billion from RM4.60 billion over the same period last year. Net interest income edged 1.4% lower to RM6.35 billion, while non-interest income surged 28% to RM5.15 billion.

Maybank also declared an interim cash dividend of 29 sen per share, amounting to a total distribution of RM3.5 billion, to be paid at a date to be determined later.

At the midday trading break on Thursday, shares of Maybank were a tad higher at RM10.88, giving the company a market capitalisation of over RM131 billion. 

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