MAYBANK's 9MFY24 net earnings (+9%) met expectations with its headline FY24 targets slated to be achieved. NIMs continued to be weighed down by high industry funding cost which could worsen during 4Q's higher rate seasonalities. Still, we believe that it should be well contained by the group as they pursue optimising their loans base for better top line retention. Maintain OUTPERFORM and our GGM-derived PBV TP of RM11.95.

9MFY24 within expectations. MAYBANK's 9MFY24 net earnings of RM7.56b made up 78% of our full-year forecast and 76% of consensus full-year estimate.

YoY, 9MFY24 net profit increased by 9%, driven by a 4% growth in NII on the back of a higher loans base (+8%) though offset by a decline in overall NIMs by 5 bps as cost of funds continued to press (which the group anticipates could widen to a 10 bps decrease by year-end. Meanwhile, NOII surged by 21% from better core fees and treasury performances. CIR rose slightly to 48.6% (+0.7 ppt) mainly on collective agreements inflating personnel costs but was cushioned by improvements in credit cost to 25 bps (-5 bps).

QoQ, 3QFY24 net profits was flattish as NII eased by 2% following a slight moderation in gross loans (-1%) from fewer working cap financing and NIMs continuing to soften (-4 bps). NOII was also stable with the decline in insurance business being cushioned by slightly higher fee-based income.

Highlights. MAYBANK's FY24 targets continued to be well intact as it reports an 8% growth in loans (+4% YTD) despite being the market share leader. This allows the group to be more selective on its loans book to better optimise its NIMs going forward by prioritising higher yielding products and clientele (i.e. SMEs, corporates). Still, pains to margins are expected to continue till year end (-c.10 bps) as the industry continues to rebalance its funding cost dynamics.

Asset quality stays a minor concern to MAYBANK as it also commands a GIL of 1.26% (vs industry's 1.54%) which we reckon would moderately increase its appetite to undertake higher-risked accounts. For now, the group is already making good strides to achieving its M25+ ROE target of 11%-12%, already at the lower end of the range.

Forecast. Post results, we tweak our FY24F/FY25F earnings by +1%/-1% from model housekeeping with the recent quarter's numbers.

Maintain OUTPERFORM and TP of RM11.95. Our TP is based on an unchanged GGM-derived PBV of 1.41x (COE: 9.5%, TG: 3.5%, ROE: 12.0%) against our FY25F BVPS of RM8.46.

MAYBANK is expected to demonstrate a slightly less compelling dividend proposition, as its yield has fallen below 6%. However, its operational resilience would hold its position as the leading bank in terms of market share and ensure sustainable earnings. Accounting for unexpected write-backs from its overlays, investors may also be positioned for higher returns in the near-term.

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.

Management Guidance

Source: Kenanga Research - 27 Nov 2024