MAYBANK’s FY23 net profits (+18% YoY) were within expectations but it paid lower-than-expected dividends from a fully cash basis. Going forward, the group anticipates more stable conditions would help the operations thrive, with a more managed NIM projection and steady asset quality concerns, albeit with possibly lower loans growth. Maintain OUTPERFORM with a higher rolled over GGM-derived PBV TP of RM11.00 (from RM9.95).

FY23 within expectations. MAYBANK’s FY23 net earnings of RM9.35b met expectations. However, the second dividend of 31.0 sen declared (full-year 60.0 sen) is below our anticipated 65.0 sen for FY23, where we assumed more generous payouts (c.90%), partly due to dividends this time being fully in cash.

YoY, FY23 net interest income fell by 4% despite a 9% loans growth due to erosion of NIMs to 2.17% (-26 bps) as funding costs stay elevated for the most part of the year. Meanwhile, non-interest income expanded by 33% from stronger forex returns. Higher operating expenses were mostly driven from inflated personnel costs from collective agreements, leading to a cost-income ratio of 48.9% (+3.7ppt). On the flipside, credit cost improved to 30 bps (-9 bps) on better asset quality. Also considering the normalisation of effective taxes, FY23 net profit reported at RM9.35b (+18%).

QoQ, 4QFY23 total income grew by 3% from an accelerated performance in loans acquisition. However, cost-income saw a notable spike on the back of lumpy personnel cost charges. This was offset by lower effective taxes during the quarter and led 4QFY23 net earnings to come in at RM2.39b (+1%).

Briefing highlights. MAYBANK had delivered close to its range guidances and anticipates a more stable FY24 to be mostly accretive to the group.

1. The +9% loans growth was a surprise win thanks to 4QFY23’s heightened domestic working capital needs. A lower but sustainable range of 6%-7% is aimed by the group, with its global banking units appearing supportive. This could help cushion possible weaknesses that may be experienced in the domestic front.

2. The group had previously guided for a NIMs compression of c.25 bps movement in FY23 and continues to expect some more subtle dilution to persist (-5 bps in FY24). While past price wars could likely subside in the market, competition on the financing side will likely exacerbate from moderating economic prospects.

3. Asset quality continues to be well managed aside from an isolated Hong Kong real estate booking. It is hopes that credit costs could sustain at 30 bps with most segments expected to not worsen amidst tight credit screening.

4. That said, the group had not written back on its outstanding RM1.7b overlay but had allocated 60% to be directed to retail and SME accounts, which we believe are generally more susceptible to downward shifts in macro conditions. Thoughts on write backs appear to still be a medium term consideration.

Forecasts. Post results, we tweak our FY24F numbers by +2% from model updates. Meanwhile, we introduce our FY25F earnings which expects flattish growth in the medium term arising from broader macro uncertainties.

Maintain OUTPERFORM with a higher TP at RM11.00 (from RM9.95) as we roll over our valuation base year to FY25F. Our TP is based on a GGM-derived FY24F PBV of 1.34x (COE: 9.9%, TG: 3.5%, ROE: 12.0%). MAYBANK is expected to demonstrate operational resilience whilst sustaining its position as the leading bank in terms of market share. We believe MAYBANK’s ability to provide the most sustainable returns via its consistent market leading dividend yields (7%−8%) warrants further accumulation of its shares.

Risks to our call include: (i) higher-than-expected margin squeeze, (ii) lower-than-expected loans growth, (iii) worse-than-expected deterioration in asset quality, (iv) slowdown in capital market activities, (v) unfavourable currency fluctuations, and (vi) changes to OPR.

Source: Kenanga Research - 29 Feb 2024