Maybank’s 1HFY22 core net profit of RM3.9b made up 39% and 45% of full-year forecasts respectively. The FY22 earnings are expected to be skewed towards the latter half of the year, with the effects of OPR hike, enhanced fee income, and lower credit costs forecasted to be fully felt by then. MIDF’s previous NIM and loan growth projections may have been too optimistic, leading it to overestimate FY22’s earnings. YTD earnings slipped by -10%yoy due to weaker NOII, higher OPEX, provisioning, and taxes offsetting the notable gains in NII.
Quarterly earnings of RM1.86b fell by -5.4%qoq, largely dragged by nearly twice as many provisions (both loan and nonloan) compared to the preceding quarter. It fell by -9.2%yoy despite a better NOII showing, due to higher provisions, OPEX, and tax expenses.
With this in mind, MIDF reduces its FY22 earnings forecasts by -9% as per previous NIM, loan growth and NCC estimates
for the year may have been a bit too optimistic. This offsets potential OPR-related gains, as the research house changes its forecasts to incorporate two further OPR hikes in 2022 from the previous forecast of one.
Key risks. Key risks to earnings include lower-than-expected NOII, should the adverse market and bond yield conditions persist, and higher-than-expected NCC, particularly to compensate for poor asset quality in Indonesian markets and NIM
contraction from an inability to sustain high CASA growth levels in foreign segments.
In terms of valuation and recommendation, MIDF is upbeat on Maybank’s long-term prospects for several reasons, first, its high dividend payout ratio of 85% translates to FY22 dividend yield of 6.6%, its the industry leader in terms of ESG initiatives and efforts, utilising its regional presence to bring the impact of a larger scale, solid loan growth in its foreign segments has boosted Maybank’s gross loan growth above the industry average and FD paring exercises in foreign segments should result in lower COF.
Thus, we maintain our BUY call with an upgraded TP of RM10.41, as we peg its FY23 BVPS to an increased PBV of 1.30x
(previously 1.22x), which we feel more adequately reflects its high ROE generating potential in FY23. (GGM assumptions:
FY23 ROE of 11.6%, LTG of 3.5% and COE of 9.7%.)
