Maybank (MAYBANK) reported a 1HFY23 net earnings of RM4.60b. YoY, 1HFY23 net interest income fell slightly as Net Interest Margins (NIM) were compressed to 2.24 basis points following heavy competition for funds amidst a loan growth of 5%.
“Meanwhile, non-interest income expanded by 56% on significantly stronger treasury and forex gains,” said Kenanga Research (Kenanga) in the recent Results Note.
On the flipside, cost-income ratio rose to 47.5% due to higher personnel costs from revised collective agreements. Credit cost for the
group improved to 31 basis points thanks to write-backs from certain corporate accounts with a more stable repayment pattern.
FY23 NIMs will likely remain hurt by the intensive deposits competition seen following the progressive OPR hikes in the past year. Previously guiding a 5 basis points compression, a widened erosion of 25 basis points is now expected. That said, recovery could be seen in the
coming quarters as product pricing is gradually rationalising.
“With better confidence on the standing of its asset quality, the group improves its FY23 credit cost outlook to close at 30-35 basis points. As it had written back provisions on certain accounts, we opine the group could be more optimistic with its repayment collections for the year,” said Kenanga.
That said, the group remains watchful on certain accounts (SMEs) which may be impacted by slowing economic macros and hence maintain its broader management overlay of RM1.7b for now.
Loans growth is still expected to remain on track with the industry but is hopeful to see stronger traction in the coming quarters from its
Singaporean market.
Deposits management is becoming more targeted with the non-renewal of expiring high-rate deposits. Although this may skew loan-deposits ratio upwards, it would keep NIMs more sustainable with capital still adequate to fuel lending.
Kenanga downgrades MAYBANK to Market Perform from Outperform but keeps the Target Price at RM9.25. MAYBANK is expected to demonstrate operational resilience whilst sustaining its position as the leading bank in terms of market share.
“However, current price points appear to have diluted its dividend yield proposition which previously stood at 8%. We opine newer investors may seek higher growth prospects with yield surprises amongst its peers,” said the research house.
Risks to their call include higher/lower-than-expected interest margin, higher/lower-than-expected loans growth, worse-than-expected deterioration in asset quality, slowdown in capital market activities, currency fluctuations, and changes to the overnight policy rate.
