MAYBANK – Fundamental Analysis (5 Sep 2016)

Excel – Download the analysis file

Latest Financial – Q2 2016 Financial Report (25 Aug 2016)

FY16 Q2 Results Highlight:

  • MAYBANK’s net profit for 2QFY16 shrink by almost 27% to RM1.16b from RM1.58b (2QFY15) as a result of higher impairment losses. For 1HFY16, net profit was at RM2.59b compared with RM3.28b in 1HFY15 despite revenue growing by 22.09% from RM18.12b to RM22.12b.
  • Gross impaired loan (GIL) ratio was 2.23% for 2QFY16, against 1.56% (2QFY15).
  • Allowances for impairment losses on loans soared by RM680.7m to RM981.7m in 2QFY16, marking a more-than-threefold increase YoY. The increase was mainly due to higher net individual allowance made of RM268.4m and collective allowance made of RM387.2m. For 1HFY16, MAYBANK’s impairment losses tripled to RM2.06b from RM693.59m in 1HFY15.
  • Net interest income and Islamic Banking income for 2QFY16 went up 7.4% to RM3.91b, compared with RM3.65b a year ago, driven by growth in Maybank’s gross loans, advances and financing.
  • MAYBANK other operating income increased by 20.6% to RM1.44b in 2QFY16 from RM1.19b in 2QFY15. The increase was mainly contributed by an unrealised mark-to-market gain on revaluation of financial assets of RM403.7m.
  • Despite the earnings contraction, the banking group declared a single-tier interim dividend of 20 sen per share.
  • Encouraging trend in gross loan growth, which rose 4.3% y-o-y. This came on the back of a 3.9% increase in Malaysian operations and a 4.3% rise in international operations, led by Indonesia, which saw a healthy 7.1% increase, and Singapore a mild 0.4%. Loan growth of 1.9% increased QoQ, arising from improved growth in corporate, consumer and small-and-medium enterprise segments.

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, 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).
  • In my opinion, fair value of MAYBANK is from 8.8 to 9.3 (Uncertainty Risk is from MEDIUM).
  • Due to its attractive dividend yield, healthy liquidity and strong capital position, I will continue to hold and accumulate MAYBANK.

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


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