CIMB Research retains Hold call for Maybank

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 reiterates its Hold call on Maybank as it thinks that the stock is fairly valued at an FY19 P/E of 12.4 times, which is above the five-year average of 11.5 times. 

On a positive note, the research house said on Wednesday Maybank’s share price was supported by an attractive projected dividend yield of 5.8% for FY19F. It retained its FY19-20F EPS forecasts and dividend discount model-based target price of RM9.85.

CIMB Research said that FY18 net profit was within expectations, accounting for 103% of its forecast and 104% of Bloomberg consensus estimate. 

“However, FY18 net DPS of 57 sen was above our projected 51 sen,” it said.

The key driver for Maybank’s 9.1% on-year net profit growth in 4Q18 was the 59.3% on-year plunge in its loan loss provisioning (LLP). 

With this, its credit charge-off rate fell to only 6bp in 4Q18, the lowest in the past four years. This is in line with the improvement in its gross impaired loan ratio from 2.65% at end-Sep 18 to 2.41% at end-Dec 18.

“The low LLP in 4Q18 helped the group to achieve an 18.8% drop in LLP for FY18. This was the major impetus for the group’s net profit growth of 7.9% in FY18. 

“However, we are disappointed that both net and non-interest income fell by 0.6% on-year and 4% on-year, respectively,” it said. 

CIMB Research said net interest income was negative, impacted by a 3bp contraction in net interest margin to 2.33% in FY18 while non-interest income was brought down by adverse investment income.

Maybank’s loan growth improved slightly from 4.5% on-year at end-Sep 18 to 4.8% on-year at end-Dec 18.

This mainly came from its Indonesian operation, which registered loan growth of 2% on-year at end-Dec 18, reversing the 4.3% on-year drop at end-Sep 18. 

The loan growth in Malaysia slid from 4.8% on-year at end-Sep 18 to 4.4% on-year at end-Dec 18, below the industry’s pace of 5.6%. 

Meanwhile, the momentum in Singapore was largely stable at circa 4.7% on-year at end-Sep 18 and end-Dec 18.