Malayan Banking Berhad - Focused Growth

Date: 
2024-02-29
Firm: 
PUBLIC BANK
Stock: 
Price Target: 
9.70
Price Call: 
TRADING BUY
Last Price: 
9.65
Upside/Downside: 
+0.05 (0.52%)

Focused Growth

Maybank ended its financial year on a steadier note with a 4QFY23 net profit of RM2.39bn (+8.3% YoY, +1.3% QoQ), though headline improvements (YoY) are largely aided by a normalization in tax rates (ie. Cukai Makmur in 2022). Cumulative FY23 net profit of RM9.35bn (+17.5% YoY) is in line with our and consensus expectations at 101% of full-year estimates. Weakness in net interest income and insurance-related contributions were mitigated by a notable uptick in non-interest income contributions, as lower loan loss provisions also helped. Our estimates are tweaked lower by 1% on average due to housekeeping changes. While we continue to like the Group’s longer term prospects underpinned by its M25+ initiatives which are gaining further traction, we lower our call to Trading Buy given the limited share price upside to our unchanged TP of RM9.70.

  • Net fund-based income fell 6.6% for the year to RM19.30bn as net interest margin (NIM) compressed 27bps (to 2.12%) due to higher funding costs. Management affirmed its resolve in defending CASA balances (CASA ratio: 36.9%), guiding for a marginal NIM compression of only ~5bps in 2024. By business segment, Community Financial Services contributions rose +7.4% YoY to RM12.96bn, though Corporate Banking/Global Markets fell 11.2% YoY to RM5.04bn. Management will continue to double-down on its mortgage, SME and retail SME portfolio across its universal markets to drive income growth, though with a keen eye asset quality preservation.
  • Non-interest income growth of +38.3% YoY to RM8.06bn for FY23 was lifted by a significant +59.2% increase in Treasury and Markets-related income (foreign exchange gains, realized capital gain on financial investments) and narrowing of insurance-related losses.
  • Loans growth was a notable +9.2% YoY, with strong expansions seen across all its key markets. Business in Malaysia (+6.2% YoY) is underpinned by the mortgage (+10.4%), auto (+9.0%) and SME/business banking (+9.0%) segments. Singapore (+8.7% YoY) is supported by the corporate banking business (+16.0%) meanwhile. Indonesia’s (+6.2% YoY) growth is evident in auto loans (+18.8%). Management has guided for a more subdued growth target of between 6% and 7% (at Group level) for 2024 however.
  • Asset quality continues to show mixed signals. Gross impaired loans ratio improved to 1.34% (3QFY23: 1.43%), though largely due to write-offs and recoveries. Loan loss provisions increased 37.8% QoQ to RM471.5m for 4QFY23 due to a net allowance in financial investments, and higher net loan provisioning. Loan loss coverage remains healthy at 124.9% (3QFY23: 127.1%) however, as formation of newly-impaired loans remained moderate (Figure 4). FY23 net credit cost (NCC) of 31bps is within management’s guidance of between 30bps and 35bps. FY24 NCC guidance is ~30bps.

Source: PublicInvest Research - 29 Feb 2024

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