• Maintain NEUTRAL and MYR9.80 TP, 8% upside. Malayan Banking’s 3Q23 results came in line. Key positives were healthy loan and fee income growth, while asset quality was stable. On the flipside, other non-II was softer QoQ – not too surprising – while NIM eased another 5bps QoQ, which management seemed to suggest has bottomed. YTD, although the stock has done well vs the FBM KLCI and Malaysia banks, it leaves limited upside potential. Its dividend yield of 6-7% should appeal to yield seekers.

• 3Q23 net profit was flat QoQ (+12% YoY) at MYR2.4bn, bringing 9M23 net profit to MYR7.0bn (+21% YoY), ie at c.75% of our and Street FY23F earnings. 3Q23 PBT slipped 6% QoQ, as non-II slumped 22% QoQ due to marked-to-market losses on derivatives, mitigated by higher fee income (+15% QoQ) on stronger card- and loan-related fees, among others. The weaker non-II was partly cushioned by a 4% QoQ decline in opex on lower personnel cost (-6% QoQ as 2Q23 was impacted by the new collective agreement) and lower loan impairments (credit cost of 29bps vs 2Q23: 38bps) as Maybank wrote back MYR134m in collective allowances on model changes. The reported ROAE of 10.7% is tracking Maybank’s 10.5-11% target, while CET-1 was solid at 15.4% (2Q23: 15.2%).

• NIM fell 5bps QoQ (2Q23: -5bps QoQ) with an estimated 10bps QoQ rise in average yield and higher LDR (+80bps QoQ to a calculated 91.6%) more than offset by a 15bps hike in average funding cost. 9M23 NIM was down 25bps vs the 2022 NIM of 2.39%, ie tracking management’s guidance of 25bps squeeze and suggests stable NIMs ahead. Despite the seasonal deposit competition, Maybank stated that it will be disciplined on pricing and the rates competition has not been as aggressive as last year’s. Also, it would be willing to push back year-end loan drawdown requests into 2024 if it meant having to pay up for the associated funding.

• Gross loans expanded 2% QoQ (+5% YoY), which was broad based across both home and other overseas markets, and sustainable into 4Q. Annualised growth was 7% led by Singapore (SG) (+7%) and others (+12%). Maybank said its market share gains in SG came from deepening client relationships rather than pricing, and in the global banking segment (eg property and REITs). Meanwhile, total deposits rose 1% QoQ (+4% YoY) while annualised growth was 5%. CASA was up 4% QoQ and as such, group CASA ratio at end-Sep 2023 ticked up to 36.6% from 35.5% in Jun 2023.

• Asset quality stable. The upticks in the GIL ratios for domestic Retail SME (RSME) (repayment assistance cohort), SG business banking, and Indonesia corporate banking (one specific name) were cushioned by ongoing write-offs and better recoveries. The GIL ratio was down 4bps QoQ to 1.43% while LLC eased to 123% (2Q23: 126%). Maybank remains watchful over the RSME and retail segments that required repayment assistance programmes. 58% of its MYR1.7bn overlays is earmarked for these segments.

• Forecasts and TP retained. Our MYR9.80 TP includes a 2% ESG premium. 

Source: RHB Securities Research - 23 Nov 2023