• NEUTRAL, TP drops to MYR11.00 from MYR11.3, 8% upside. With c.6% FY24F yield. Malayan Banking’s 3Q24 results are in line. Non-II has been a bright spark this year, as well as asset quality – with Maybank hanging on to its MYR1.7bn overlay buffers. On the flip side, NIM slid further amid yield pressures from the loan mix and funding challenges to keep pace with the earlier strong loan growth. While rebalancing its loan book will take time, we are heartened by management’s plan to adopt a funding-led growth strategy for next year. Valuations look fair, for now.

• 3Q24 results met expectations, with net profit of MYR2.5bn (flat QoQ, +8% YoY) bringing 9M24 net profit to MYR7.6bn (+9% YoY), at c. 77% and 76% of our and consensus FY24F PATMI. It was largely a stable quarter on a sequential basis. YoY, 9M24 PATMI growth was driven by non-II (+26% YoY), thanks to higher core fees and insurance income. Reported 9M ROE was 11.1% (tracking guidance), while CET-1 ratio stood at 14.7% (2023: 15.3%). It estimates a 20bps impact to CET-1 ratio from next year’s implementation of Basel III reforms on RWA for operational risk.

• NIM eased 3bps QoQ (-10bps YoY) due to lower loan yields from the loan mix (eg continued strong growth in lower yielding mortgages), while there was a shift in deposit mix during the quarter. 9M24 NIM was 2.04%, down 11bps vs the rebased NIM of 2.15% in 2023 and roughly in line with the c.10bps squeeze guided. Looking ahead to 4Q, the seasonal deposit competition will pressure NIM, but Maybank aims to manage this and keep NIM stable. Beyond that, it is trying to rebalance its loan book away from lower-yield loans (eg global banking in Singapore) and add higher-margin loans such as auto loans. It also plans to adopt a funding-led approach next year, to avoid the NIM pressure it faced earlier to fund the strong asset growth.

• Loan target retained. Annualised loan growth eased to 5% due to FX and a slowdown in its Indonesian global banking book, as part of efforts to rebalance the loan mix there. Maybank has approved MYR3bn in data centre (DC)- related loans so far while maintaining pricing discipline. As for the Johor- Singapore Special Economic Zone, it expects a bigger impact for the non-retail segment and sees a spillover to sectors such as renewable energy, transport and manufacturing from the current DC-centric demand. There is no change to its 7-8% loan growth guidance. Meanwhile, annualised deposit growth was 2% (CASA: flat YTD). Its LDR eased QoQ to 92.6% (2Q24: 93.2%) while its CASA ratio declined to 36.2% vs 38.1% in 2Q24.

• Asset quality improved in 3Q, with pre-emptive R&R initiatives for some domestic retail SME accounts more than offset by recoveries. Hence, absolute GIL was 2% lower QoQ while the GIL ratio contracted by 3bps QoQ to 1.26% (3Q23: 1.43%). LLC remains healthy at 121% (2Q24: 124%; 3Q23: 123%) with MYR1.7bn in management overlays still on the books.

• Earnings forecasts fine-tuned but the impact is not significant. TP updated to MYR11.00 and includes a 6% ESG premium.

Source: RHB Securities Research - 27 Nov 2024