We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM10.30/share from RM10.00/share after rolling forward our valuation to FY23F, pegging the stock to a P/BV of 1.3x supported by an ROE of 11%. Our FV has taken into account a premium of 3% based on a 4-star ESG rating.
We make no changes to our earnings estimate. Underlying net profit was within expectation, accounting for 24% of our and 26% of consensus estimate.
Maybank recorded lower core earnings of RM2.2bil (-7% YoY) in 1Q22 despite stronger fund-based income from a NIM expansion and loan growth coupled with a decline in provisions. This was mainly attributed to lower non-fundbased income from a drop in investment and trading income and core fees. We gather that market-related fees have slipped YoY.
Opex remained well controlled with a growth of 4% YoY for 1Q22 mainly driven by higher marketing, admin and general expenses.
The group’s overall loans grew by 5% YoY in 1Q22 (4Q21: 5.7% YoY). This was mainly supported by growth in community financial services’ (CFS) and global banking (GB) loans in Malaysia and Singapore. Also, Indonesia’s expansion of GB loans contributed to the growth.
Group deposits expanded by 5.5% YoY in 1Q22 vs. 6.5% YoY in 4Q21. CASA grew 9.6% YoY while expensive FDs were trimmed in Indonesia and Singapore. Group CASA ratio rose to 46%.
NIM in 1Q22 expanded by 3bps YoY to 2.34% underpinned by lower funding cost. Management alluded to another OPR hike of 25bps in 2H2022 to raise the benchmark interest rate to 2.25%. Typically, a 25bps rise in the OPR will increase the group’s NIM by 1–2bps.
Gross impaired loans decreased by 0.8% QoQ in 1Q22 contributed by loan write-offs. As a result, the group’s GIL ratio declined modestly to 1.95%.
In 1Q22, provisions for loan losses declined by 48% YoY contributed by lower provisions for stage 2 loans and higher recoveries. Net credit cost of 32bps for 1Q22 was within management’s guidance of 40–50bps for FY22.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....