We maintain BUY call on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM9.80/share, pegging the stock to a P/BV of 1.3x based on FY23F ROE of 10.9%. A 3% premium has been accorded to the valuation based on a 4-star ESG rating.
We make no changes to our earnings estimate as underlying earnings in 1Q23 were within expectation, accounting for 23.8% of our FY23F net profit and 24.3% of consensus estimate.
After stripping out the impact of Cukai Makmur in 1Q22, core earnings in 1Q23 grew by 2.1% YoY to RM2.3bil. In 1Q23, stronger non-interest income (NOII) and lower provisions were partially offset by a decline in net fund-based income from net interest margin (NIM) compression and higher operating expenses (opex). 1Q23 NOII rose by 12.4% YoY supported by higher treasury & markets income. 1Q23 saw realised & unrealised derivative gains of RM0.32bil, higher FX profits and gains in investment and trading income partially offset by marked-to-market losses on financial liabilities.
Opex grew by 11.8% YoY in 1Q23, driven by higher personnel costs which included collective agreement (CA) adjustments. Also increases were marketing expenses, establishment cost, admin, and general expenses. This led to a higher CI ratio of 48.3% in 1Q23 vs. 43.7% in 1Q22. Excluding the CA adjustments of RM15mil, the CI ratio would have been lower at 47.5%.
The group’s overall loans moderated to 5.3% YoY in 1Q23 6% YoY in 4Q22. Malaysian loans grew 5.1% YoY, slightly above industry’s 5% YoY growth. Loans in Indonesia expanded by 7.2% YoY while the loan book in Singapore contracted by 0.4% YoY.
Group deposit growth eased further to 3% in 1Q23 compared to 3.5% YoY in 4Q22. FDs and other deposits recorded positive growth while CASA balances fell, led by the decline in Singapore followed by Malaysia. The group’s CASA ratio slipped to 39.1% in 1Q23 vs. 40.9% in 4Q22. Nevertheless, the ratio was still above the pre-pandemic level of 35.5% in Dec 19.
1Q23 NIM contracted by 15bps YoY to 2.19% due to higher funding costs in Malaysia. We expect pressure on funding cost to abate in the sequential quarters due to the group’s plans to reprice deposit rates lower as well as softer FD campaign rates offered recently in the market.
Provisions for loan losses were lower by 18.7% YoY. Net credit cost of 24bps in 1Q23 was within management’s guidance of 35–40bps for FY23.
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....