Investment Highlights

• We maintain HOLD on Malayan Banking (Maybank) with an unchanged fair value (FV) of RM10.80/share, pegging the stock to P/BV of 1.3x supported by FY25F ROE of 10.7% and 3% premium based on our 4-star ESG rating.

• Our FY24/25/26F earnings have been tweaked by -1.5%/- 0.3%/-0.7% to reflect lower NIM margin assumptions and higher estimates for OPEX and NOII.

• 6M24 net profit of RM5bil were within expectations, accounting for 49.9% of our and 50.6% of consensus estimate.

• The group recorded a higher net profit of RM2.5bil (+1.7% QoQ) in 2Q24. Higher net fund-based income from improvement in NIM of 2bps to 2.02% coupled with expansion of loan book, lower opex and provisions were partially offset by weaker non-fund-based income.

• 6M24 saw Maybank’s net profit rose 9% YoY to RM5bil, underpinned by higher total income (+9.4% YoY) which more than offset increased OPEX and provisions.

• Net fund-based income grew modestly, underpinned by strong loan growth across all markets (Malaysia, Singapore and Indonesia). NIM declined 15bps YoY to 2.01% in 6M24. YTD, Maybank’s interest margin has fallen by 11bps, and management has revised its guidance for FY24F NIM to be compressed by 10bps, higher from up to 5bps previously. This is to reflect the potential downside risk to margins in Singapore on its USD loan book.

• Non-interest income in 6M24 grew 28.4% YoY on the back of higher treasury and markets income, increase in core fees (wealth management, loan-related, brokerage and IB advisory) and stronger income from insurance business. Management alluded to potentially softer treasury and markets income in 3Q24 and 4Q24.

• Negative JAW of 2.6% YoY for 6M24 with OPEX growth (+12% YoY) outpaced total income. As a result, CI ratio was higher at 48.6%, still within management’s guidance of <49% for FY24F. The increase in OPEX was driven by higher staff, establishment, marketing, administration and general expenses. Expenses related to M25+ strategy totalled RM188mil in 6M24.

• The group’s loans moderated to 10.4% YoY in 2Q24 vs. 11.7% YoY in 1Q24. Malaysian loans grew 10.6% YoY, outpacing the industry’s 6.4%, supported by mortgages, auto finance, business banking SME loans and corporate loans under Global Banking (GB) segment. In Singapore, loans expanded by 12.5% YoY, supported by growth of community financial services (CFS) and GB segment financing book. Loans in Indonesia grew 11.9% YoY led by growth in non-retail segments (SME, business banking, RSME and corporate loans). Moving into 2H24, the group’s loan growth will decelerate to between 7%-8% as Maybank plans to focus on the right areas for growth to protect interest margins. We gather that growth in mortgage loans will slow down to preserve profitability.

• Group deposits declined by 0.4% QoQ to manage cost of funds. CASA grew moderately by 2% QoQ which led to a marginal increase in CASA ratio to 38.1% in 2Q24 vs. 37.3% in 1Q24.

• Net credit cost of 25bps in 6M24 was within management’s guidance of up to 30bps for FY24F. GIL ratio improved slightly to 1.29% in 2Q24 vs. 1.32% in 1Q24.
   
• An interim dividend of 29 sen/share (payout: 69.7%) has been declared in 6M24, similar in quantum to 6M23.

Source: AmInvest Research - 29 Aug 2024