We maintain our OUTPERFORM call and GGM-derived PBV TP of RM11.00. MAYBANK hosted an Investor Day with a focus on Etiqa, its group insurance and takaful division. It holds leading positions in all key insurance classes with a strong base supported by strong bancassurance channels with its principal. Going forward, it sees opportunities to widen its overseas presence and to adopt more sustainable frameworks. Maintain forecasts.

In FY23, it is noted that Etiqa contributed RM1.1b in pretax profits (c.9% of total group). Key takeaways are as follows:

- Strong bancassurance focus. Etiqa has a base of 4.2m customers of which 45% of them appear to have been acquired via bancassurance channels. It is also noted that MAYBANK has an overall portfolio of 12.3m customers, of which only 3.3m are also Etiqa customers (i.e. 79%). The group anticipates its bancassurance channel to continue to tap into the wider group’s regional network, although we gather that most growth is attributed to life insurance products (see Exhibit 1).

- Domestic market the lion’s share. From its FY23 gross premium of RM11.5b, 75% of its business originates in Malaysia with Singapore being its second largest market (18%). We see local markets likely to see the greatest support from its notable presence in motor class insurances, where the group prides themselves with a higher expense ratio in favour of well-compensating its panel vendors to strengthen customer experience. The group intends to widen its profit margins here by targeting higher value vehicles and tapping onto its auto finance centres to accelerate growth. Within the motor business, Etiqa appears to have the second largest market share, behind ALLIANZ. (see Exhibit 2).

- Defending its turf. While the group already holds a leading presence amongst its peers, it seeks to defend its position via new innovations to its ecosystem with more direct engagement with customers through its mobile app on air travel notifications, policy reminders and rebates for prolonged uses. Better ease of use could develop stickier relationships to the platform.

On the bancassurance space, the group sees opportunities open from the gradual utilisation of data analytics to ensure more effective targeting and offerings towards potential customers. Supplementing the growth of its general business, the group looks towards more holistic services to corporate clients with comprehensive risk advisory to ensure more relevant premium rates being underwritten.

- Insurance can be sustainability focused too. In line with MAYBANK’s group-wide objective to achieve Net Zero Carbon Equivalent by 2050, Etiqa has moved to not underwrite any Greenfield Coal Power Generation Plants by 2025. It would also work with its partners and the wider supply chain to advocate more sustainable practices (possibly with regards to emissions management and adopting more renewable solutions) whilst offering green insurance products and services.

Forecast. Maintained.

Maintain OUTPERFORM and TP at RM11.00, based on an unchanged GGM-derived FY25F 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 in MAYBANK’s ability to provide the most sustainable returns via its consistent market share albeit now with more moderate dividend yields (c.6%).

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 the OPR.

Source: Kenanga Research - 5 Jul 2024