Everybody is pitching M&A ideas, including a possible acqusition of Public Bank, but Maybank is very laidback at the moment about any such move, some analysts say.
KUALA LUMPUR: CIMB Research said Malayan Banking Bhd
’s (Maybank) first quarter net profit was below expectations at 20% of its full-year forecast and 21% of consensus due to the unexpectedly chunky provisioning for corporate loans.
“The weaker-than-expected 1Q16 results prompted us to lower our FY16 earnings per share forecasts by 3.6% and dividend discount model (DDM)-based target price to RM10.60, due to the 19.4% increase in projected loan loss provisioning (LLP),” CIMB said.
The research house said Maybank’s first quarter net profit fell 16.1% year-on-year, dragged down by a 248.8% year-on-year jump in LLP.
This arose from its prudent move to reschedule and restructure (R&R) a corporate loan in Singapore with a value of about RM800mil (about US$195mil), which required the bank to classify the loan as impaired and provide the necessary provisions.
“There is a possibility of a write-back of this provisioning as R&R loans can be reclassified as non-impaired if the borrowers repay their loans promptly for six consecutive months,” it added.
Maybank’s gross impaired loan (GIL) ratio rose further from 1.86% in December 2015 to 2.11% in March 2016. The increase came mainly from the classification of a R&R loan in Singapore.
Apart from this, asset quality for other segments was largely intact. Of the GIL ratio of 2.11%, 33bp was for R&R loans, which can be reclassified back to non-impaired if the borrowers repay these loans promptly for six consecutive months.
CIMB said Maybank’s loan growth eased from 12.3% year-on-year in December 2015 to 5.7% year-on-year in March 2016, the worst since September 2009. There was a slowdown in all major markets –from 6% year-on-year in December 2015 to 3.7% year-on-year in March 2016 (versus industry’s 6.4%) for Malaysia, from 21.7% year-on-year to 12.9% year-on-year for
Singapore, and from 16.6% year-on-year to 7.9% year-on-year for Indonesia.
Despite the slowdown in loan growth, CIMB said net interest income (NII) still grew by a commendable 11.4% year-on-year in first quarter, thanks to an 8bp year-on-year expansion in net interest margin (NIM) to 2.34%.
“Despite the weaker-than-expected first quarter results, Maybank remains an ‘add’, premised on the recovery in the earnings contributions from Indonesia, benefits of the ongoing regionalisation of its operations and regional expansion of its insurance and Islamic banking businesses,” CIMB said.
“The increase in the GIL in first quarter mainly came from a few corporate accounts and does not signify a systemic risk on asset quality. Downside risk to our target price is a further deterioration in asset quality that will lead to higher credit costs,” it added.
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