MAYBANK (1155): MALAYAN BANKING BHD
MAYBANK Share Prices
Last Price : 9.87 Upside Potential +1.13 (11.45%)
We reaffirm our OUTPERFORM rating based on our GGM-derived PBV for KLSE maybank 2 u. Maybank’s cautious FY24 targets seem justified, especially considering potential sector-specific risks such as sluggish loan growth due to delayed economic activities and heightened inflation. maybank 2 u is likely to retain its overlays for the time being, awaiting clarity on macroeconomic uncertainties affecting loan repayments. While dividends may be solely in cash in the short term for MAYBANK, the yield of 6%-7% remains appealing. Our forecasts for FY24F/FY25F on MAYBANK remain unchanged.
Key takeaways from our recent meeting with MAYBANK (maybank 2 u) are as follows:
- Anticipating a softer landing for loans growth, Maybank sets its FY24 target at 6%-7%, a decline from FY23’s 9%. This is driven by sustainable yet slower demand across various sectors, with consumer spending and economic activity contributing to the momentum. Maybank’s global banking units are poised to benefit from regional recoveries, particularly in Indonesia’s buoyant economy and expanding corporate portfolios.
- Domestically, the group foresees opportunities stemming from increased secondary mortgage transactions, potentially allowing for a gain in market share as competitors may become less aggressive in this domain. Additionally, investments are being made in interface enhancements and features to enhance customer retention in SME and business accounts.
- However, Maybank acknowledges the risk of delays in the rollout of public infrastructure projects, which could impede its progress towards meeting targets.
- Margin compression remains a concern, possibly driven by yield dynamics. Despite the alleviation of some pressures from FY23’s net interest margin (NIM) compression of 27 bps due to a tighter deposit landscape, the group still anticipates NIM compression of up to -5 bps in FY24. This could be attributed to increased loan demand prompting banks to compete more aggressively for financing market share.
- Maybank aims to maintain its overlay reserve of RM1.6 billion as of 4QFY23, primarily to cushion against vulnerabilities in retail SMEs amidst macroeconomic shifts. Excess provisions may be considered for write-back in FY25.
- Maybank’s Sustainable growth in non-interest income (NOII) is a focus area, with expectations of moderation from the surge witnessed in FY23, particularly in treasury gains. However, growth opportunities are anticipated in fee-based streams, particularly in wealth management and insurance, driven by efforts to expand into regional markets.
- maybank 2 u intends to continue offering cash dividends, departing from the dividend reinvestment scheme in FY23. While maintaining a dividend policy of 40%-60%, actual payments may exceed this range, with recent dividends representing approximately 77% of earnings.
- Despite near-term challenges, MAYBANK (maybank 2 u) is viewed favorably as a sustainable investment, supported by its leading market position and brand equity. Concerns may arise in the second half of CY24, particularly regarding the impact of targeted fuel subsidies on inflation and the timely implementation of public infrastructure projects.
- Kenanga Research maintains an OUTPERFORM rating, based on an unchanged GGM-derived FY25F PBV of 1.34x. Operational resilience and market leadership are expected to underpin MAYBANK’s performance, with dividends still offering close to 7% returns even without the dividend reinvestment scheme.
- Risks to the outlook include higher-than-expected margin pressure, slower-than-expected loan growth, deterioration in asset quality, slowdown in capital market activities, unfavorable currency movements, and changes to the Overnight Policy Rate (OPR).
Source : Kenanga Research – 17 Apr 2024
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