Report: Maybank may not get full payment of loans

Fitch Ratings said Maybank's long-term IDRs and viability rating (VR) reflected its dominant franchise in Malaysia and able management team, which help to underpin its stable funding and liquidity position, sound capital buffers and steady earnings performance through business cycles.

PETALING JAYA: Malayan Banking Bhd (Maybank) may not be able to receive a full payment of loans taken by Singapore’s global environmental solutions company Hyflux Ltd, according to Nomura.

It was reported that Hyflux’s Tuaspring project received only one bid by the Oct 1 deadline, and that bid, put forth by utilities, marine, and urban development group Sembcorp Industries Ltd, was lower than Tuaspring’s book value of S$1.47bil (RM4.42bil).

Maybank is the main project financing bank for Tuaspring’s Integrated Water and Power Plant (IWPP) and TuasOne’s Waste-to-Energy (WTE) Plant.

For the IWPP, Maybank is the sole secured lender. Maybank had previously disclosed its total exposure to the projects at SG$659mil (RM1.98bil), which indicated that the bid might be substantially below book value.

Nomura said the lack of bids raised the risk of more provisions in the future for Maybank, as the divestment process might take longer to materialise.

“We are not sure of how much the bid falls below Maybank’s current net exposure of S$550mil (RM1.65bil).

“While we do acknowledge risks related to Hyflux, note that our credit cost estimate at 50 basis points is higher than management’s 40 to 45 basis points target.

“The return on equity estimated for FY18 at 10.4% is lower than management’s 11% guidance. However, as the second quarter financial year 2018 (Q2FY18) results showed, Maybank’s large earnings base can help reduce the impact of provisions,” said Nomura, adding that Maybank’s Q2FY18 earnings were in line with its estimates, in spite of elevated Hyflux-related provisions.

Maybank’s collective exposure for project financing of Tuaspring’s IWPP and TuasOne’s WTE Plant amounts to S$659mil (RM1.98bil), of which the IWPP makes up 90% of the total exposure, with the remaining 10% by the WTE plant.

Both exposures secured against the project assets.

Maybank had already impaired the exposure worth RM1.95bil in its Q2FY18 results.