PETALING JAYA: Malayan Banking Bhd’s (Maybank) new five-year strategic plan will see the banking group focusing on ways to sustain its return on equity (ROE), boost experience for its customers as well as help it become a regional environmental, social and governance (ESG) leader.
Citing notes from the lender’s corporate presentation last Friday, Hong Leong Investment Bank’s (HLIB) research analysts said on the whole, they liked the many strategies put forth by Maybank for the next five years.
“We find it has a lot of levers to pull in order to realise its 2025 business-as-usual ROE, ” it told clients in a report yesterday.
Based on HLIB’s calculations, the goals do not appear to be stretched as total income only has to grow by a five-year compounded annual growth rate or CAGR of 2.2% while operating expenditures expansion must be contained at a softer clip of 1.3% versus 1.8% previously.
HLIB which has a “buy” call on Maybank with a target price of RM9.20 said the stock’s risk-reward profile is still skewed to the upside premised on it being a prime candidate for rotational recovery play among FBM KLCI constituents and it being less susceptible to foreign equity sell-off.
Kenanga Research meanwhile pointed out that among Maybank’s key strategies under its new 5-year plan are to boost regional banking businesses, insurance segments, emphasis on digital capabilities as well as widen its investment banking and management based propositions.
“The group intends to develop a more prominent ESG identity, ” it added.
The research house said it has given Maybank stock a higher target price of RM10.60 (from RM8.65 previously) as it inputs higher ROEs.
Commenting on the banking sector as a whole, Kenanga which is positive on the sector opined that even if loans and net interest income growth remained tepid and vaccination progress is slower-than-expected, banks could continue to yield earnings growth having implemented leaner cost structures amidst the tight operating environment during the height of virus lockdowns.
“Plus, with most impairments being frontloaded in Q4CY20, we anticipate any further provisioning during 2021 to be milder, ” said the research house.
Notably, banks have been hit hard by the Covid-19 pandemic, which has more than put a dent on consumer sentiment and spending.
Kenanga noted that despite the consensus for economic outlook being skewed towards some degree of recovery, year-to-date, institutional investors have taken a cautious stance on the financial sector and have been reducing such positions.
“Foreign investors have also showed less favour (with regards to) our banks but this has been a prevailing trend since 2019 possibly as Malaysia is perceived to be a dicier bet on bureaucratic factors as well as Covid-19 impact, ” it said.
Kenanga said still, it believed there was little cause for concern as share prices and valuation levels for the sector have remained relatively stable and that could help propel a stronger upward trajectory when these investors return.
At the end of yesterday’s trading session, Maybank finished 3 sen higher at RM8.32.