Investment Highlights

• We maintain BUY call on Malayan Banking (Maybank) with a lower fair value (FV) of RM9.50/share from RM9.60/share, pegging the stock to a P/BV of 1.2x supported by ROE of 10.5%. Our FV has taken into account a premium of 3% based on a 4-star ESG rating.

• We fine-tuned our FY22F/23F/24F by -0.8%/-0.7%/-1.9% after tweaking our loan growth and net interest margin (NIM) assumptions.

• 9MFY22 net profit was within expectation, accounting for 72.1% of our and 79.8% of consensus estimate.

• Opex grew 9.8% YoY for 9MFY22 driven by higher personnel cost (increase in wages and bonus provisions), IT and revenue related expenses.

• Maybank recorded higher core earnings of RM2.4bil (+23% QoQ) in 3QFY22 contributed by stronger Islamic banking, non-interest income (NOII) and lower loan loss provisions. NOII improved in 3QFY22 due to higher FX income and lower marked-to-market (MTM) losses on financial assets and investments.

• Core net profit for 9MFY22 came in at RM6.6bil, +9.7% YoY after stripping out the impact of Cukai Makmur. This was attributed to higher net interest income (NII) from NIM expansion of 8bps YoY and loan expansion. Also, the group recorded stronger NOII for 9MFY22, supported by higher FX gains and MTM gains from derivatives and financial liabilities.

• The group’s overall loans expanded by 8.2% YoY in 3QFY22. This was supported by growth of loans in all key markets (Malaysia, Singapore and Indonesia). Malaysian loans grew 7.9% YoY above the industry’s 6.4% YoY growth.

• Group deposits’ growth eased slightly to 5% YoY in 3QFY22. CASA contracted by 0.1% YoY due to the slowdown of lowcost deposits in Malaysia and Singapore. Higher funding cost from a slower CASA and stronger FD growth will partially offset the positive impact on NIM contributed by improved asset yields from recent OPR hikes.

• 3QFY22 NIM expanded slightly by 1bps QoQ to 2.42% due to higher loan yields from increased interest rates. YTD, NIM rose by 7bps to 2.39%. Management alluded to a further interest rate hike of 25bps in 1Q23 raising the OPR to 3.00%.

• 9MFY22 provisions for loan losses were lower by 25% YoY Net credit cost of 43bps for 9MFY22 was within management’s guidance of 40–50bps for FY22. No further top up on management overlays in 3Q22. Total overlays remained at RM1.7bil of which 38% or RM646mil has been allocated for the CFS retail and RSME portfolio.

Source: AmInvest Research - 24 Nov 2022