RHB Research noted that Maybank’s NIM has improved to 2.19% in 1Q23 from 2.39% in FY22.
PETALING JAYA: Malayan Banking Bhd
’s (Maybank) growth prospects remain buoyant through the financial year ending Dec 31, 2023 (FY23), following a decent performance for the first quarter ended March 31 (1Q23).
This expectation is supported by the group’s benign credit cost, improved contributions from its associates and a lower effective tax rate.
In addition, the largest banking group has likely seen the worst in terms of net interest margin (NIM) compression, according to RHB Research.
In its report, the brokerage noted that Maybank’s NIM has improved to 2.19% in 1Q23 from 2.39% in FY22.
“Malaysia was the biggest contributor to the year-on-year (y-o-y) NIM decline and, to an extent, Singapore,” RHB Research wrote.
“However, Maybank has seen local fixed-deposit (FD) board rates start to ease and plans to adjust down its FD rates as well from 2Q23.
“Together with May’s overnight policy rate (OPR) hike, these should bode well for NIMs ahead,” it added, noting that Maybank was maintaining its five to eight basis point (bps) NIM compression guidance for FY23.
RHB Research said Maybank’s asset quality held up, with the gross impaired loan ratio improving to 1.5% in 1Q23 from 1.6% in 4Q22 and 2% in 1Q22, while loan loss coverage ratio rose 134% in 1Q23 from 133% in 4Q22 and 108% in 1Q22.
“Overlay buffers stayed at RM1.7bil. Maybank remains watchful for potential asset quality stress from consumer and small and medium enterprise loans as there have been incidences of missed payments post exit from repayment assistance programmes.
“The corporate segment, however, has been holding up better than expected,” the brokerage explained.
It noted that Maybank’s reported return on equity of 10.7% in 1Q23 was tracking the management’s 10.5% to 11% target, while the common equity tier 1 was solid at 15.1% as compared to 14.8% in 4Q22.
RHB Research kept its “buy” call on Maybank, but revised down its target price of RM9.45 from RM9.65 previously, after lowering the ascribed environment, social and governance premium to 2% from 4% for the counter.
Meanwhile, Hong Leong Investment Bank Research maintained its “hold” call on Maybank, with an unchanged target price of RM8.90.
“We expect NIM slippage to moderate in 2Q-3Q23 given large proportion of FD would have been repriced in 1Q23, (and) more rational FD rivalry, coupled with the recent OPR hike, which could help blunt contraction,” the brokerage said.
TA Research noted Maybank remained supported by solid capital and liquidity positions to support asset growth.
It lowered its loan growth assumption for Maybank to 4.3% from 4.9% for FY23, 5.3% to 5.9% for FY24 and 6.3% from 7% for FY25. The brokerage maintained its “hold” call on Maybank, with an unchanged target price of RM8.70.
Kenanga Research maintained its “outperform” call, with an unchanged target price of RM10.10. “We opine the group to deliver moderate income growth on less aggressive loan growth and interest margin suppression as compared to preceding years.”
