CIMB Research keeps Hold call for Maybank, 9M net profit in line

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.

KUALA LUMPUR: CIMB Equities Research is retaining its Hold recommendation for Malayan Banking Bhd (Maybank) at RM9.85 after the release of its financial results for the nine months ended Sept 30, 2018.

It said on Friday Maybank’s 9M18 net profit was in line at 73% of its full-year forecast and Bloomberg consensus estimates. 

However, 3Q18 net profit declined by 3.5% yoy on the back of a 3.3% yoy drop in operating revenue. Loan loss provisioning (LLP) rose by 8.3% yoy in 3Q18 due to lower recoveries.

“Maybank’s 9M18 net profit increased 7.4% yoy, underpinned by the 3.2% yoy drop in overheads, arising from lower administration and establishment costs. 

“At the topline, net interest income slid by 1.8% yoy due to margin erosion. Overall, operating revenue only edged up by 0.8% yoy in 9M18,” it said.

Loan growth was stable at 4.5% yoy at end-Sep 18 vs. 4.6% yoy at end-Jun 18. 

The momentum in Malaysia eased from 6.1% yoy at end-Jun 18 to 4.8% yoy at end-Sep 18,
below the industry’s pace of 5.7%. 

Conversely, Singapore’s loan growth picked up from 3.7% yoy to 4.6% yoy over the same period. 

Meanwhile, the contraction in the loan base in Indonesia narrowed from 7.4% yoy at end-Jun 18 to 4.3% yoy at end-Sep 18.

The gross impaired loan (GIL) ratio was stable at 2.65% at end-Sep 18 (vs. the same level at end-Jun 18) while the loan loss coverage fell slightly from 79.4% at end-Jun 18 to 78.5% at end-Sep 18.

“We reiterate our Hold call on Maybank as we think that the stock is fairly valued with a FY19 P/E of 12.3x which is above the five-year average of 11.8 times. 

“On a positive note, the share price is supported by an attractive dividend yield of a projected 5.8% for FY19F.

“We prefer RHB Bank for exposure to Malaysian banks. We retain our FY18-20F EPS forecasts and DDM-based target price of RM9.85,” it said.