Malayan Banking - KPI targets on track Hold

- At our recent company visit, Maybank indicated it believes its capital levels are now sufficient for BASEL III, post its recent new share placement. Maybank hinted its common equity ratio at the bank entity level is more than 14% as at end-September 2012, assuming the phase-in arrangements allowed by Bank Negara as well as the share placement.  

- The only three other factors outstanding which may change capital ratios are:- (a) possible systemically important financial institutions (SIFI) requirements; (b) possible local incorporation of its Singapore operations; and (c) if there are any potential mergers and acquisitions between now and 2015 (nothing firm on the cards right now).  A possible SIFI buffer requirement is new  – we believe this is not yet reflected in current share price.  

- In terms of organic asset expansion, Maybank reckons that capital levels are sufficient to support organic growth of 12% p.a. 

- Topline loan growth is expected to be flat on a QoQ basis in 4QFY12, in line with the earlier flattish QoQ trend in 3Q12. This is because the good growth in 2QFY12 came mainly from large lumpy corporate loans, which are not expected to recur. 

- Maybank’s in-house forecasts for industry loans growth in 2013 is circa 10% for Malaysia. It expects its loan growth for FY13 to likely be above the industry’s. NIM is likely to continue to see some compression.  

- As for investment banking fees, we expect 4QFY12 to be relatively quite resilient given its Sapura and Astro mandates. Looking ahead, the deal pipeline is unlikely to be as large as in FY12F, but is still likely to be relatively healthy on the back of regional capital markets such as the Philippines and Indonesia as well as reasonable mid-sized deals in Malaysia.

- As for asset quality, Maybank hints that this has remained stable. There had been relatively strong recoveries generally for most of 2012, with the bulk stemming largely from the business loan segment. We expect Maybank’s credit cost to be below the 36bps target overall for FY12. To recap, Maybank’s latest 9MFY12’s credit cost was at 23bps.  

- In terms of dividend, Maybank hints it is likely to maintain its dividend payout ratio at similar levels, given its ongoing dividend reinvestment programme. Maintain HOLD on Maybank.   

Source: AmeSecurities