PublicInvest Research

Malayan Banking Berhad - Mixed Bag

PublicInvest
Publish date: Thu, 23 Nov 2023, 09:45 AM
PublicInvest
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp

PUBLIC INVESTMENT BANK BERHAD (20027-W)
9th Floor, Bangunan Public Bank
6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
T 603 2031 3011 | F 603 2272 3704 | Dealing Line 603 2260 6718

Maybank reported a flattish 3QFY23 net profit of RM2.36bn (+12.3% YoY, +0.8% QoQ) on a sequential basis, with lower loan loss provisions mitigating weaker net interest income contributions. Cumulative 9MFY23 net profit of RM6.96bn (+21.0% YoY) is broadly in line with our expectations at 72% of full-year numbers, though closely within consensus at 75%. Numbers were a mixed bag, with margin compressions continuing to impact fund-based income though foreign exchange gains provided mitigating support via fee-based income. Loan loss provisions were helped by write-backs meanwhile. We trim our estimates by an average of 3.5% as we make changes to assumptions in non-interest income contributions and credit costs. Near-term challenges notwithstanding, we continue to like the Group’s prospects, underpinned by its M25+ initiatives. Our Outperform call and TP of RM9.70 are retained.

  • Net fund based income declined 6.0% YoY to RM14.43bn for 9MFY23, with margins compressing (~25bps, annualized) due to higher funding costs as a result of last year’s cumulative rate hikes and continued deposit competition. (1QFY23: 2.19%, 2QFY23: 2.14%). Business wise, Community Financial Services contributions rose +8.4% YoY to RM9.61bn, though Global Banking slumped 12.6% YoY to RM4.06bn.
  • Non-interest income growth was a robust +37.8% YoY to RM5.95bn for 9MFY23, with foreign exchange gains (+>100% YoY to RM1.86bn) providing the biggest lift. Gains in investment and trading income was also a healthy RM0.75bn compared to RM0.04bn last year.
  • Loans growth was stable at +5.1% YoY, with the international portfolio continuing to gain traction. Business in Malaysia (+3.7% YoY) remains underpinned by the mortgage (+8.9%), auto (+8.8%) and SME/business banking (+7.6%) segments. Singapore (+3.0% YoY) is supported by the corporate banking business (+6.7%). Indonesia recorded a weaker +0.9% YoY growth as headway in the community financial services business (+8.9%) was weighed by contraction in the global banking book (-10.8%).
  • Asset quality indicators were also a mixed bag. Headline number for gross impaired loans ratio improved to 1.43% (2QFY23: 1.47%), though aided by write-offs and recoveries. Of some concern is the elevated incidences of newly-impaired loans (Figure 4), with strains coming from Singapore (business banking) and Indonesia (corporate banking). Loan loss coverage remains healthy at 127.1% (2QFY23: 130.3%). 9MFY23 annualized net credit cost of 31bps is within management’s unchanged guidance of between 30bps and 35bps.

Source: PublicInvest Research - 23 Nov 2023

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