Thursday 21 March 2013

Malayan Banking - Clear market leadership in Islamic finance 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 recently hosted an Investor Luncheon Talk on Maybank Islamic Bhd (Maybank Islamic).

- Islamic finance is one of Maybank’s key strategic pillars. Its vision is to be a regional financial services leader by 2015.

- Maybank Islamic has maintained its leadership position in both financing and deposit. It has the highest market share in financing at 26.2%, while market share of deposit is at 23.2% as at end-FY12 for the domesticmarket. Its market share of assets is at 22% overall, while it estimates that the next largest competitor is at 16%.

- Maybank Islamic now contributes about 30.6% of the total overall domestic financing for the group. Thus, Maybank Islamic is on track to achieve its target of onethird contribution to the group’s domestic loans by FY15F.

- At the pre-tax level, Maybank Islamic’s profit had risen to RM1.19bil in FY12, from RM953mil in FY11.

- Domestic penetration for Islamic products is high. Maybank Islamic estimates that about 40% to 45% of its domestic Islamic loan customers and about 50% of its domestic deposit customers are non-Muslims.

- In terms of industry penetration, it estimates Islamic financing contributed 29% of total financing in FY10. Maybank Islamic said Islamic financing is estimated to account for 40% of total financing by 2020, according to Bank Negara Malaysia.

- There is strong growth potential in Indonesia. The total Islamic loans now contribute about 5% to 6% of total industry loans in Indonesia. Maybank’s Indonesian subsidiary Bank Internasional Indonesia (BII)’s Islamic loans now comprise about 4% of total loans.

- We reckon that Maybank Islamic has done well given its dominant leadership position. This is due to Maybank Islamic leveraging on its overall domestic branch network, besides providing end-to-end solutions in its recent global wholesale banking deals.

Source: AmeSecurities

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