- We are maintaining BUY on Malayan Banking Bhd (Maybank),
with an unchanged fair value of RM9.80/share. This is based on an ROE for FY12F
of 14.7%, which translates into a fair P/BV of 2.1x.
- We believe Maybank is on track to achieve its overall group
loans growth target of 16.2% FY12F. We understand that Maybank’s corporate
loans segment under its global wholesale bank is doing well currently.
- We believe the bank has seen strong loan demand from government-linked
companies as well as companies inthe oil and gas and manufacturing
segments.
- Thus, the corporate loans segment is likely to exceed have
internal budget so far. Maybank alluded to part of these coming from the
government’s Economic Transformation Programme (ETP). The types of corporate
loans approved recently are related to project financing, trade financing,
working capital and ETPrelated loans.
- We expect non-interest income for Maybank to be softer QoQ
in the upcoming quarter, but this is due mainly to the absence of lumpy items.
Recall that its last 2QFP11 quarter was boosted partly by a large transfer of
surplus of RM178mil from life insurance funds.
- The softer non-interest income line will likely be offset by
low loan loss provisions. So far, the gross impaired loans trend has remained
benign. Maybank had earlier highlighted that it believed key areas of risks
in the event of a slower-than-expected
economic environment may be the SME loan segment. The company hinted there has been no major
worrying sign in this SME portfolio or in the overall loan portfolio for
the year to date. We expect credit costs
to be below the company’s earlier articulated target of around 35bps to 40bps FY12F
(our forecast is 59bps FY12F).
- Maybank reaffirmed that it is unlikely to consider any domestic bank acquisition. This is
positive as it means that dividend payout will remain intact. The latest indications
are positive, as loans growth is likely to come in above our expectations,
while loan loss provisioning may be well below our estimates.
- We believe key rerating catalysts from hereon are:- (a) improvement
in asset quality, which will provide comfort that an up-cycle in loan loss
provisioning will likely be short-lived; (b) better-than-expected ROE; (c)
betterthan-expected dividend.
Source: AmeSecurities
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