KUALA LUMPUR: CGS-CIMB Equities Research views Malayan Banking Bhd (Maybank) as a clear leader in adopting environmental, social and governance (ESG) as its exposure to ESG vulnerable sectors only accounted for 5.4% of its total loans at end-March 2021.
These included palm oil sector (2.3% of total loan), oil and gas (2%), forestry and logging (0.7%), coal (0.2%) and mining (0.2%), it said in a research note.
“The small exposure to ESG-vulnerable sectors further supports our choice of Maybank as our ESG pick among the Malaysian banks.
“Other reasons why we are positive on Maybank from the ESG perspective are (1) most comprehensive ESG disclosure, (2) its initiatives to work with its customers to enable a transition of its customers to higher ESG standards, and (3) leveraging on its regional network to implement its ESG initiatives which will broaden the base of beneficiaries,” it said.
Maybank hosted a Sustainability Investor Day (SID) on Monday which covers its initiatives and focuses on ESG.
CGS-CIMB Research said it is relatively more positive on Maybank following the event, adding the banking group is one of the most active Malaysian banks in engaging with its customers to help the customers to improve their ESG standards.
Guided by its Risk Acceptance Criteria, which are sector-specific ESG-related financing guidelines, Maybank has dedicated teams (Scrum teams) to work with customers on ESG-related matters, with the aim of improving the customers’ ESG adoption.
“We gathered that there are more than 100 Maybank’s employees involving or supporting the Scrum teams. Each of the Scrum teams is specialsed in certain ESG-vulnerable sector.
“Maybank remains an Add as apart from being our ESG pick among the Malaysian banks, we are also positive on the expected recovery in its core EPS growth to our projected 9.2% in FY21F, which would be the potential re-rating catalyst.
“Maybank’s dividend yield is also attractive at 4.9% in FY21F. We reduce our FY21-23F EPS forecasts by 1-2% and lower our dividend discount model-based target price from RM9.30 to RM9.10 as we increase our assumed share base from 11.4 billion to 11.7 billion to factor in the 279.3 million new shares issued under the dividend reinvestment plan,” it said.