We maintain our OUTPERFORM call and GGM-derived PBV TP of RM11.95. MAYBANK hosted an Investor Day for its Singaporean and Indonesian units, were we learn about their hurdles as well as strategies. Collectively, they make up c.20% of overall pretax profits to the group. Maintain forecasts.

Maybank Singapore and Maybank Indonesia make up 15% and 5% of group pretax profits. Key takeaways are as follows:

- Strong consumer franchise in Singapore. Maybank Singapore stands at 5th with regards to loans market share in Singapore, where it caters to an equal share of consumer financing (mainly mortgage and hire purchase) and corporate banking (i.e. global banking). It reported a 5-year loans growth CAGR of 4% between FY19-FY23 (closely in line with the group’s 4.1%). However, its 5-year average ROE of 7% is behind the group’s 9.5%, no thanks to a more volatile funding cost landscape there. As of 1HFY24, ROE sat at 11.3% namely from better NOIIs as NIMs remain under pressure. On the flipside, it enjoys a diminished GIL during FY23 at 0.81% (FY19 at 4.41%) in tandem with a supportive FY23 LLC of 161%.

- Opportunities in foreign partnerships. Towards FY27, Maybank Singapore seeks to identify itself as a preferred foreign financial partner, facilitating more cross-border transactions and trade financing between Malaysia and Singapore which as of 1HFY24 makes up c.5% of total loans books.. Via Etiqa’s life insurance products, there is room for further penetration in the country, especially given its aging population.

- Indonesia seeking to regain ground. Maybank Indonesia holds 14th place with regards to loans market share in Indonesia where competitors benefited from consolidation to boost market share. That said, the gap between Maybank Indonesia IDR189t loans book and the largest player, Bank Mandiri is wide at IDR2,258t. During the last 5 years, its loans growth was choppy at a 5-year CAGR decline of 1.1% while contributed to a lower-than-group average ROE of 6%. We also note that the asset quality scene in Indonesia appears challenging, at c.4% over the last 5-years as delinquencies were pinned by lower income prospects. That said, the group believes the worst is over and may see sequential improvements.

- Building on what it knows best. With consumer financing making the majority of its loans, the group looks to double down its efforts here with digitalisation (including a digital credit card solution) hopeful to spur better engagement. Wealth management products also appear to be a relatively undertapped segment by the group, especially for Sharia product which Maybank was a pioneer in.

Amid a wide spread recovery, SMEs are poised to demonstrate higher growth potential to support its overall loans base.

Group outlook. Post Investor Day, we have a better appreciation for the MAYBANK group’s subsidiaries and understanding of several granular and large challenges. That said, the majority of group earnings still stems from Malaysia operations (making up 70% of total pretax profits). Broadly, group operations will be sustained by the rollout of domestic infrastructure projects and investments on the back of a stable jobs market.

Forecast. Maintained.

Maintain OUTPERFORM and TP at RM11.95, based on an unchanged GGM-derived FY25F PBV of 1.41x (COE: 9.5%, TG: 3.5%, ROE: 12.0%). MAYBANK is expected to demonstrate operational resilience whilst sustaining its position as the leading bank in terms of market share. We believe in MAYBANK’s ability to provide the most sustainable returns via its Risks to our call include: (i) higher-than- expected margin squeeze, (ii) lower-than-expected loans growth, (iii) worse-than-expected deterioration in asset quality, (iv) slowdown in capital market activities, (v) unfavourable currency fluctuations, and (vi) changes to the OPR.

Source: Kenanga Research - 7 Oct 2024