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Maybank still the darling despite huge Q2 provisions

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Analysts mostly retain ‘buy’ or ‘outperform’ call based on its potential to yield dividends and strategic five-year plan.

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Despite huge provisions, analysts remain upbeat on the outlook for Maybank.

KUALA LUMPUR:
Despite huge pre-emptive allowances in the second quarter ended June 30 (Q2) of its current financial year, analysts remain positive on the outlook for Malayan Banking Bhd (Maybank).

At a press conference yesterday, Maybank group president and CEO Khairussaleh Ramli said the bank’s nearly 60% increase in allowances for impairment losses on loans in Q2 could just be a one-off event.

He said that the spike in loan loss provision is a pre-emptive measure in anticipation of weaker external environment outlook in the second half of the year.

Hong Leong Investment Bank Bhd (HLIB) analyst Chan Jit Hoong pointed out that although Maybank’s Q2 profit decreased 5% year-on-year (y-o-y), sequential net interest margin (NIM) had expanded in response to the overnight policy rate (OPR) hikes.

Furthermore, he said, loan growth held firm and gross impaired loan (GIL) ratio saw a downtick.

Overall, Maybank’s results were in line with HLIB’s forecast, Chan said.

“We still like Maybank for its regional exposure and leadership position. Moreover, it has superior dividend yield, scores highly in our internal environmental, social, and governance (ESG) assessment, and has been gaining relatively stronger financial metrics compared with other large local banks,” he said in a note today.

Chan said HLIB has maintained its “buy” call on Maybank with a Gordon growth model (GGM) target price of RM9.70, based on 1.25 times financial year ending Dec 31, 2023 (FY2023) price-to-book (P/B) ratio.

Kenanga Investment Bank Bhd (Kenanga IB) analyst Clement Chua said Maybank’s selective pre-emptive provisioning showed that it was looking to position itself more firmly against possible uncertainties.

“However, we expect this to normalise in the subsequent periods should conditions not worsen,” he said in a separate note.

Overall, Chua sad Kenanga IB still believes that Maybank’s operations are undeterred, and growth delivery remains intact, reaffirming the investment bank’s view of it being a sustainable dividend yielder.

Kenanga IB maintains its “outperform” call on Maybank, with a GGM-derived price-to-book value (PBV) target price of RM11.05.

In a separate note, AmInvestment Bank Bhd analyst Kelvin Ong said Maybank’s RM1.3 billion provision for losses and financial investments of RM472 million in Q2 were mainly pre-emptive provisions for potential vulnerable loans due to macro headwinds.

“We maintain our ‘buy’ call on Maybank with an unchanged fair value of RM10.30 per share, pegging the stock to a PBV of 1.3 times, supported by a return on equity (ROE) of 11%,” he said.

Public Investment Bank Bhd analyst Ching Weng Jin said with near-term challenges notwithstanding, it continues to like Maybank’s prospects, underpinned by its five-year strategic M25 Plan (from 2021 to 2025).

“We affirm our ‘outperform’ call with an unchanged dividend discount-based target price of RM9.70,” he said.

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