MAYBANK – Fundamental Analysis (14 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q3 2015 Financial Report (26 Nov 2015) and Annual Report 2015 (15 Mar 2015)

FY15 Q4 Results Highlight:

  • MAYBANK’s FY15 net profit grew marginally (+1.8%) as strong revenue growth was mitigated by higher provisions. Pre-provision profit registered robust growth (+16% y-o-y) as NIM improved (+8bps y-o-y), loan growth remained steady while non-interest income was lifted by higher forex gains and commissions, service charges and fees. Loan and deposit growth both stood at 12% y-o-y (6/7% ex currency effect). On a sequential basis, revenues were lower due to lower Islamic banking and non-interest income. This was partially offset by higher insurance income. Expenses were higher q-o-q and y-o-y led by higher personnel, IT and admin costs. Cost-to-income ratio trended higher.
  • NPL increased to 1.86% (from 1.54% in 3QFY15), attributable to specific accounts within the trading and manufacturing sector in Labuan, Greater China and Hong Kong. Slight upticks were also noted in its Malaysian portfolio. Consequently, individual allowance surged during the quarter. The asset quality situation in Indonesia appears to have stabilised. Provisions were lower q-o-q, saved by large writebacks in collective allowances, but were significantly higher y-o-y. This led to credit cost reaching a high of 44bps vs just 11bps a year ago. Loan loss coverage reached a new low of 72% (87% including regulatory reserves; 96% in FY14).

Valuation:

  • In my opinion, fair value of MAYBANK range from 9.3 to 9.8. Uncertainty risk of fair value is MEDIUM.

MAYBANK-FY15Q4-Football-Field

Going Forward:

  • FY16 Guidance – For 2016, Maybank is guiding for slower loan growth of 8-9% (Malaysia 6-7%, Singapore 3-4%, Indonesia 11-13%), and slower deposit growth of 10-11%. In addition, with the challenging operating environment, ROE is also guided to be lower at 11-12%. NIM would likely edge lower on stiff deposit competition while credit costs are likely to remain elevated at current levels (40-50bps).
  • Due to its attractive dividend yield, healthy liquidity and strong capital position, I will continue to hold MAYBANK, and accumulate MAYBANK without increasing my average price too much.

At the time of writing, I owned shares of MAYBANK.

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