• Maybank’s FY23 net profit was within expectations at 97% of our forecast and 100% of Bloomberg consensus’.

• We project FY24F EPS growth of 11.6% for Maybank, on the back of a 7.7% rise in net interest income.

• Reiterate Add, as we expect potential write-back of management overlay and capital management initiatives to enhance its dividend yield and ROE.

FY23 net profit within expectations

Malayan Banking’s (Maybank) FY23 NP was within expectations, accounting for 97% of our forecast and 100% of Bloomberg consensus estimate. On a positive note, FY23 DPS of 60 sen (translating to attractive dividend yield of 6.3%) was above our projection of 49 sen. FY23 net profit advanced by 17.5%, lifted by the non-recurrence of Cukai Makmur taxation, 32.9% surge in non-interest income, and 16.3% decline in loan loss provisioning.

Strongest loan growth since 2015

It is noteworthy that Maybank’s loan growth recovered strongly from 5.1% yoy at end-Sep 23 to 9.2% yoy at end-Dec 23, the strongest since 2015. The growth was mainly driven by the double-digit loan expansion of 15.5% in Singapore and 13.1% in Indonesia. In Malaysia, its loan growth of 6.3% yoy at end-Dec 23 also topped the industry’s pace of 5.3% yoy.

Positive Maybank guidance paints a rosy picture for 2024F

We are encouraged that Maybank provided several positive guidance for its financial performance in FY24F, including (1) strong loan growth of 6-7%, and (2) an expansion of 5bp in net interest margin. With this, Maybank’s net interest income would expand by around 7% in FY24F, reversing the 7.4% decline in FY23. The bank also expects its credit charge-off rate in FY24F to not exceed the 30bp recorded in FY23.

We project 11.6% EPS growth and ROE expansion in FY24F

We are projecting 11.6% EPS growth for Maybank in FY24F, on the back of a 7.7% expansion in net interest income. Based on this, we expect its ROE to expand from 10.4% in FY23 to 11.2% in FY24F, in line with the company’s FY24F ROE target of 11%.

Reiterate Add on Maybank

A write-back of its management overlay, pick-up in its loan growth, and capital management initiatives could lead to an increase in its dividend payout ratio and ROE in FY24-26F. We see these as potential re-rating catalysts and as such, we reiterate our Add call on Maybank. Key downside risks to our Add call are a deterioration in its loan growth and deterioration of its asset quality. We retain our FY24-25F EPS forecasts and DDM- based target price of RM10.60 (cost of equity of 10.1%, terminal growth rate of 4%).

Source: CGS-CIMB Research - 28 Feb 2024