Improving Further

Maybank reported another sequentially better set of results, with 2QFY24 net profit of RM2.53bn (+8.2% YoY, +1.7% QoQ) contributing to a cumulative 1HFY24 net profit of RM5.02bn (+9.0% YoY) which met both our and consensus estimates at 51% of full-year numbers. Steady improvements were seen all round, with strong core fee (wealth management, brokerage, advisory) growth of +16.5% supported by better insurance performance, higher treasury and markets income and steady net interest income contributions as a result of the robust loans base expansion. Our earnings estimates are kept unchanged, though we raise our dividend-based TP to RM11.40 as we make changes to our valuation variables (i.e. risk premiums). Forward earnings multiple remain relatively inexpensive despite the healthy YTD share price gain. We continue to like the Group’s longer term prospects underpinned by its M25+ initiatives, and retain our Trading Buy call.

• Net fund-based income rose 1.5% YoY to RM9.77bn for 1HFY24, underpinned by the Group’s strong loans growth in its home markets. While net interest margin (NIM) improved sequentially (+2bps), management has however revised its full-year compression expectations higher to ~10bps (from ~5bps) due to higher cost of funds. By business segment, Community Financial Services contributions rose 7.7% YoY to RM6.77bn though Corporate Banking/Global Markets fell 9.0% YoY to RM2.30bn.

• Non-interest income growth was a healthy +29.4% YoY to RM5.15bn for 1HFY24, with commission income growing +14.1% YoY to RM784m, service charges and fees improving +19.4% YoY to RM1.08bn and Treasury and Markets-related income improving +17.4% YoY to RM2.58bn.

• Loans growth remained at a relatively healthy +10.4% YoY at Group level, on strong expansions across all its key markets. Business in Malaysia (+10.6% YoY) is still driven by the mortgage (+13.2%), auto (+8.6%) and SME/business banking (+11.2%) segments. Singapore (+12.5% YoY) is still supported by the corporate banking business (+11.5%) while Indonesia’s (+12.1% YoY) growth is evident in retail SME (+16.7%) and business banking (+17.0%).

• Asset quality. Gross impaired loans ratio improved further to 1.29% (1QFY24: 1.32%) mainly due to better recoveries (from corporate borrowers). However, net impairment losses were higher by 6.5% to RM924.1m due to an uptick in allowances for financial investments. Loan loss coverage remains healthy at 128.7% (1QFY24: 127.3%), with formation of newlyimpaired loans also appearing under control (Figure 4). Net credit cost of 27bps is still within management’s guidance of ~30bps for FY24.

Source: PublicInvest Research - 29 Aug 2024