Review

• Maybank’s 9MFY24 net profit rose 8.5% YoY, supported by an 8.7% YoY increase in net operating income. Results came within expectations, representing 79% of our full-year estimates. Annualised ROE stood at 11.1% (9MFY23: 10.7%), within management’s FY24 target of 11%.

• The higher net operating income was underpinned by stronger-thanexpected contributions from Islamic Banking operations and non-interest income (non-NII), which accelerated by 14.7% and 16.9% YoY to RM6.3bn and RM7.1bn. The improvement in non-NII was due to 1) improved core fees from higher wealth, loan-related and brokerage and IB advisory fees, and 2) higher underwriting income from the insurance businesses. YoY Treasury & Markets were down 3.6% YoY, however, due to lower realised gains from derivatives.

• 9MFY24 net fund-based income (NII) improved slightly to RM14.7bn vs RM14.4bn a year ago, underpinned by a combination of a 4.8% YTD increase in loan growth and 11 bps YTD decline in the net interest margin (NIM) to 2.04%. By geography, loans were driven by Singapore (+14.5% YTD), followed by Indonesia (+8.9% YTD) and Malaysia (+8.0% YTD). NIM slipped by 3 bps QoQ, eroding the 3 bps sequential improvement in the previous quarter.

• In Malaysia, loans from Community Financial Services increased by 8.8% YTD and 9.7% YoY. The increase was anchored by the rise in mortgages (+13.3% YoY), credit cards (+9.3% YoY) and auto loans (+7.9% YoY). Elsewhere, SME and Business Banking loans accelerated by 10.5% YTD and 11.9% YoY due to a strong recovery in Business Banking (+24.3% YoY). Growth in SME loans, however, softened to 3.9%. Loans outstanding in Corporate Global Banking also grew at an encouraging 14.5% YoY.

• Total group deposits rose at a softer pace of 6.7% YoY, compared to an increase of 7.9% in 2Q. Deposits in Malaysia broadened by 11.4% YoY, while deposits accumulated overseas fell by 0.7% YoY. Maybank’s loan-todeposit (LD) ratio rose slightly to 93.8% (Dec 23: 91.7%). At RM256bn, group CASA deposits widened by a marginal 0.6% YoY. With that, the CASA ratio softened to 36.2% from 36.9% in FY23.

• 9MFY24 total overhead expenses rose by 6.8% YoY (-2.0% QoQ) due to Personnel costs (+11.9% YoY, due to provisions for collective agreements, sales incentives and inflationary pressures on medical costs), Admin & general (+5.4% YoY, partly due to higher commission and brokerage fees), Marketing (+13.3% YoY) and Establishment expenses (+10.2% YoY due to higher IT expenses). YoY, the group’s cost-toincome (CTI) ratio broadened to 48.6% from 47.9% in 9MFY23 due to negative JAWs.

• YoY, net impairment losses grew 5.4% YoY to RM1.27bn, underpinned by increases in Stage 3 net Expected Credit Losses (ECL), part of which is attributed to some deterioration in the retail and RSME portfolios. Nevertheless, the annualised net credit charge-off rate improved to 26 bps (9MFY23: 31 bps), in line with management’s FY24 guidance of keeping the net credit charge-off rate at less than 30 bps.

• Loan loss coverage softened to 125.8%. Maybank’s GIL ratio improved to 1.26% as of September 2024 (September 2023: 1.43%) due to write-offs, recoveries and more robust growth in group loans. By geographical segment, the YoY improvement was anchored by lower GIL for Malaysia (1.26%), Singapore (0.46%) and Indonesia (4.15%).

• Maybank’s CET1 and total capital ratio stood at 14.7% and 17.9% as of September 2024, respectively. The liquidity coverage ratio (LCR) stood at 132.3%, and the Net Stable Funding Ratio (NSFR) was at 114.1% - above regulatory requirements.

Impact

• Adjusting our earnings forecast to align with Maybank’s 9M results performance, we raised FY24/25/26 net profit to RM 9,961/10,541/11,061mn from RM9,541/9,914/10,471mn, respectively.

Outlook

• Management anticipates a stable economy throughout the region, although the strength of loan growth may vary across its home markets. Management anticipates that loan growth will accelerate in Malaysia, whereas the industry's loan growth has weakened in Indonesia. Singapore may experience weakened demand as the Fed is likely to slow down the pace of rate reductions, while property transaction volumes in the citystate continue to be lacklustre.

• Nevertheless, in terms of 2024 targets, management plans to maintain a robust liquidity position, optimise capital through RWA initiatives, and strategically defend CASA balances. Overall, management is guiding for a NIM compression of up to 10 bps for FY24 and a CTI ratio to be maintained below 49%. In terms of asset quality management, recovery efforts will be prioritised to achieve a sustained net credit charge-off rate of <30 bps. Taken together, management aims to achieve an ROE of 11% for FY2024.

Valuation

• We have increased Maybank’s target price from RM11.85 to RM12.15 due to the upward revision in earnings. Our valuation is based on an implied PBV of c. 1.46x based on the Gordon Growth Model and a 3% ESG premium. Buy maintained on Maybank.

Source: TA Research - 27 Nov 2024