Review

• Maybank’s FY23 net profit rose by 17.5% YoY, supported by a 3.3% YoY increase in total income and lower impairment and allowances. Results came within expectations, representing 99% of our full-year estimates. ROE stood at 10.8%, within management’s FY23 target of 10.5-11%.

• A full cash second interim dividend of 31 sen per share was proposed. With that, total dividends for the year stood at 60 sen (FY22: 58 sen) – representing a payout ratio of 77.4% (FY22: 76.7%).

• The higher net operating income was underpinned by stronger non-fundbased income (non-NII), which accelerated to RM8.06bn from RM5.8bn in FY22. The improvement was due to better contributions from Treasury and Markets (+59.2% YoY), which was lifted by higher forex profit and investment and higher realised capital gain on financial investments. On a positive note, core fee income also improved by 7.4% YoY, anchored by higher service charges, commission and underwriting fees.

• FY23 net fund-based income (NII) declined by some 6.6% YoY, underpinned by a further contraction of the net interest margin (NIM) of 27 bps YoY to 2.12% (FY22: 2.39%). Management noted that the compression was attributed to the steep increase in funding costs across home markets. Meanwhile, the group loans grew by 9.2%, driven by Malaysia (+6.7% YoY). Overseas, loans and advances in Singapore grew by 8.7% YoY, while loans in Indonesia rose by 6.2%.

• In Malaysia, loans in Consumer Financial Services increased by 7.2% YoY. The increase was anchored by the rise in mortgages (+10.4% YoY). Demand for other consumer loans, such as credit cards (+15.9% YoY) and auto loans (+9.0% YoY), remained healthy. Elsewhere, SME and Business Banking loans accelerated by 9.0% YoY due mostly to robust demand from the SME segment (+38.3% YoY), while Business Banking loans declined by 17.1% YoY. Loans outstanding in Corporate Global Banking contracted by a more resounding 5.9% YoY.

• Total group deposits rose by 9.0% YoY. Deposits in Malaysia rose by 4.9% YoY, while deposits accumulated overseas jumped 16.2% YoY. Maybank’s loan-to-deposit (LD) ratio stood at 91.7% (Dec 22: 91.6%). At RM246.5bn, group CASA deposits are down by 1.7% YoY. The CASA ratio slipped to 36.9% from 40.9% in FY22.

• FY23 total overhead expenses rose by 11.8% YoY due to Personnel costs (+10.9% YoY, partly due to provisions for the collective agreement), Admin & general (+18.1% YoY, due to credit card related fees on higher billings and merchant volume) and Establishment expenses (+12.3% YoY due to higher depreciation of ROU asset and IT expenses). The group’s cost-to-income (CTI) ratio broadened to 48.9% from 45.2% a year ago due to negative JAWs.

• YoY, total allowances on loans fell 16.4% to RM1,826mn attributed to writeback for corporate borrowers and financial investments, as well as recoveries and stable impairment volumes/balances YoY. The annualised net credit charge-off rate improved to 31 bps (FY22: 40 bps), in line with management’s FY23 guidance of 30 - 35 bps.

• Loan loss coverage slipped to 124.9%. Maybank’s GIL ratio improved to 1.34% as of end-December 2023 (December 2022: 1.57%) due to writeoffs, recoveries and reclassification of accounts. By geographical segment, the YoY decrease was anchored by lower GIL for Malaysia (1.21%) and Indonesia (3.88%). Singapore, however, reported an uptick in the GIL ratio to 0.81% (December 2022: 0.57%) due to the formation of new impaired loans in the business banking portfolio.

• Maybank’s CET1 and total capital ratio stood at 15.3% and 18.6% as of December 2023, respectively. The liquidity coverage ratio (LCR) stood at 142.1%, and the Net Stable Funding Ratio (NSFR) was at 122.0% - comfortably above regulatory requirements.

Impact

• Incorporating the FY23 results, we adjust Maybank’s FY24/25 net profit slightly lower to RM9,541/9,914mn from RM10,037/10,765mn. We forecast FY26 net profit to increase by 5.6% to RM10,471mn.

Outlook

• Maybank is looking to focus on growing within the ASEAN franchise, targeting its portfolios, particularly in mortgage, RSME, and SME+ segments across universal markets. Global Banking is set to deepen account planning across segments, focusing on the mid-market segment and enhancing cash management penetration. Concurrently, Maybank is committed to diversifying revenue streams by expanding wealth management, especially in Islamic offerings, and broadening the bancassurance footprint. Maybank is also aligning with sustainable financing solutions to bolster its position in the evolving financial landscape.

• In FY24, management plans to maintain a robust liquidity position, optimise capital through RWA initiatives, and strategically defend CASA balances. Despite that, management is guiding for a slight NIM compression of up to 5 bps for FY24. Elsewhere, Maybank will continue to invest strategically. Management expects to maintain a CTI ratio below 49%. In terms of asset quality management, recovery efforts will be prioritised to achieve a sustained lower net credit charge-off rate of 30 bps. Taken together, management is targeting to achieve an ROE of 11% for FY2024.

Valuation

• Updating beta assumptions based on the latest data obtained from Bloomberg, we adjusted Maybank’s TP to RM9.90 from RM9.50. Our valuation is based on an implied PBV of c. 1.19x based on the Gordon Growth Model. We maintain our HOLD recommendation on Maybank.

Source: TA Research - 29 Feb 2024