PETALING JAYA: Malayan Banking Bhd
’s (Maybank) first quarter (1Q24) earnings of RM2.5bil was within consensus estimates, leaving analysts to keep their current valuation on the bank intact.
Hong Leong Investment Bank (HLIB) Research expects Maybank’s net interest margin (NIM) to widen in the subsequent quarters, as the banking group’s management intends to be more disciplined in pricing new loans while rivalry for fixed deposits is now less intense, which allows it to optimise its loan-to-deposit ratio.
“That said, loan expansion is seen to taper as a result of its NIM enhancement strategy. Net credit cost could improve to less than 30 basis points (bps), considering better asset quality management and recovery efforts.
“We are not overly worried on any potential asset quality deterioration as we believe Maybank is more equipped versus prior slumps; its loan loss coverage is now at 121% versus pre-pandemic level of 73%,” the brokerage stated in a report.
HLIB research has thus maintained a “hold” call on Maybank with a higher target price (TP) of RM9.60 a share, from RM9.20 previously, after rolling its valuations to financial year 2025 (FY25) and based on 1.17 times price-to-book (P/BV) from 1.15 times with the assumptions of 10.3% return on equity (ROE), 9.2% cost of equity and 3% long-term growth.
“The premium is fair given its regional exposure and leadership position. It offers a good dividend yield of about 6%. That said, Maybank’s risk-reward profile is balanced in our view as there are no new positive catalysts to spur share price upwards,” it said.
Maybank’s net profit grew 9.8% year-on-year (y-o-y) in 1Q24 on stronger non-interest income earned on core fees, income for treasury, markets and insurance but offset partially by higher operating expenses, as well as provisions for impairment of loans and investments.
The group’s loans accelerated to 11.7% y-o-y in the period with its Malaysian operation’s loans growing by 8.2%, while corporate loans under its global banking segment grew by 7.4% (mainly term loans and tradelines).
Total group deposits rose by 8.9% y-o-y in the quarter with deposits in Malaysia up by 6.2%, while deposits accumulated overseas jumped 13.5%.
Based on Maybank’s 1Q24 results, AmBank Research has maintained its “hold” recommendation on the group with an unchanged fair value of RM9.90 a share, pegged to a P/BV of 1.2 times, supported by FY24 ROE of 10.5%.
Moving ahead, Maybank intends to focus on growing its Asean business, especially its mortgage, retail small and medium enterprises (SME) and SME+ segments.
It is committed to diversifying revenue streams by expanding in wealth management, especially in Islamic offerings, and broadening the bancassurance footprint, TA Research noted.
“It is also aligning with sustainable financing solutions to bolster its position in the evolving financial landscape.
“In FY24, management plans to maintain a robust liquidity position, optimise capital through risk-weighted assets initiatives and strategically defend current account, savings account balances,” it said.
It added that Maybank’s management has guided for a slight NIM compression of up to five bps for FY24.
TA Research has adjusted Maybank’s TP to RM10.80 a share from RM9.90, with the valuation based on an implied P/BV of 1.31 times, and raised its recommendation from “hold” to “buy.”
