Malayan Banking - A more subdued topline growth in 3Q Hold

- We are maintaining our HOLD rating on Malayan Banking Bhd (Maybank), with an unchanged fair value of RM10.20/share. This is based on an ROE of 14.0% FY13F, which translates into a fair P/BV of 1.9x.

- Maybank’s 3QFY12 annualised net profit was 13.1% above our forecast and 8.4% above consensus. This was on account of much lower-than-expected loan loss provisions. 

- Group loans growth was flat at only 0.6% in 3QFY12, due mainly to the lumpy nature of 2QFY12’s 5.7% QoQ that was boosted by large corporate loans. Annualised loans growth was at 10.5% in 3QFY12, and is thus below targeted group loans growth of 16.2%. Maybank’s QoQ NIM was unchanged at 2.42% in 3QY12.   

- Given the slower pace of loans growth in 3QFY12, Maybank hinted that its target of 16.2% may not be achievable. This is due to an overall slower industry loans growth and its less aggressive growth stance in view of intensive price competition in Singapore. 

- Non-interest income was lower by 7.0% QoQ in 3QFY12, attributed to the absence of large investment bank mandates. 

- Overall gross impaired loans balance has continued  to drop significantly, by 4.2% QoQ in 3QFY12. 

- Recall that 2QFY12 also had a large decrease, by 13.7% QoQ – attributed to a couple of large accounts which underwent restructuring and were resuscitated. 

- On a brighter note, gross impaired loans ratio has now been reduced to below the 2.0% mark, to 1.9% in 3QFY12 from 2.0% in 2QFY12. Loan loss cover was maintained at 104.7% compared with 104.2% in 2QFY12 – vs. 94.5% in 1QFY12. Credit cost remained low (due to recoveries) at only 12bps (2QFY21: 27bps), thus coming in well below the 36bps guidance. The company indicated that it has not experienced any major worrying signs in asset quality and does not foresee weaknesses ahead. 

- Maybank’s 3QFY12 has slowed down in terms of topline loans growth and fee income, underscoring the lumpy nature of 2QFY12’s strong growth. With asset quality being sustained, the continuing upside surprise came mainly from its low loan provisions. We maintain HOLD on Maybank.   

Source: AmeSecurities