Hong Leong Investment Bank has retained a “Buy” recommendation for Malayan Banking at a trading price of RM9.40 based on 1.22x FY22 P/B with assumptions of 9.4% ROE, 8.2% COE, and 3.0% LTG. This is broadly in line with its 5-year mean of 1.19x but ahead of the sector’s 0.87x.
The premium is warranted considering its regional exposure and leadership position. Also, it offers a superior dividend yield of c.7% (3ppt higher vs peers).
Besides, it is one of the least affected banks by “Makmur Tax” and its lower foreign shareholding vs larger banks makes it less susceptible to sell-off.
HLIB said that it expects net interest margin (NIM) to hold steady at current levels since Bank Indonesia seems to have paused its monetary easing cycle, instead preferring to lean on other policies to lift domestic credit demand (loosening down-payment rules).
Also, loan de-risking and re-profiling activities will likely prevent its NIM from widening. As for loan growth, we see recovery in the next 6-9 months. Separately, loan restructuring efforts will help to limit a significant deterioration in NPL ratio; Otoritas Jasa Keuangan (a government agency that regulates and supervises the financial services sector) has prolonged the loan restructuring program until Mar-23 to support troubled borrowers.
