company guide maybank · 2222q16 earnings q16 earnings q16 earnings further weakened on higher...

Refer to important disclosures at the end of this report ed: CK / sa: BC

HOLDHOLDHOLDHOLD Last Traded Price: Last Traded Price: Last Traded Price: Last Traded Price: RM7.90 (KLCIKLCIKLCIKLCI : : : : 1,680.30) Price Price Price Price Target 12Target 12Target 12Target 12----mthmthmthmth :::: RM7.50 (5% downside) (Prev RM8.60) Potential Catalyst: Potential Catalyst: Potential Catalyst: Potential Catalyst: Recovery in asset quality and regional operations

Where we differ:Where we differ:Where we differ:Where we differ: We have imputed higher credit cost assumptions Analyst Malaysian Research Team +603 2604 3333 [email protected] Lynette Cheng +60 32604 3907 [email protected]

What’s New • 2Q/1H16 earnings hit by another round of

provisions driven by higher impaired loans • Impaired loans increased on accelerated

rescheduled and restructured loans for oil & gas and steel sector exposures

• Earnings to be weighed down by uncertainties of credit costs and loan growth; cut earnings by 6-12% across FY16-18F

• Maintain HOLD, lower TP of RM7.50 post earnings and valuation base adjustment

Price Relative

Forecasts and Valuation FY FY FY FY DecDecDecDec ((((RMRMRMRMmmmm) ) ) ) 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF 2018201820182018FFFF

Pre-prov. Profit 10,953 11,037 11,467 12,355 Net Profit 6,836 5,772 6,942 7,707 Net Pft (Pre Ex.) 6,836 5,772 6,942 7,707 Net Pft Gth (Pre-ex) (%) 1.8 (15.6) 20.3 11.0 EPS (sen) 71.7 58.1 67.5 72.4 EPS Pre Ex. (sen) 71.7 58.1 67.5 72.4 EPS Gth Pre Ex (%) (3) (19) 16 7 Diluted EPS (sen) 70.0 57.1 66.4 71.2 PE Pre Ex. (X) 11.0 13.6 11.7 10.9 Net DPS (sen) 54.0 42.8 47.5 48.3 Div Yield (%) 6.8 5.4 6.0 6.1 ROAE Pre Ex. (%) 11.9 9.0 10.2 10.9 ROAE (%) 11.9 9.0 10.2 10.9 ROA (%) 1.0 0.8 0.9 0.9 BV Per Share (sen) 632 659 664 670 P/Book Value (x) 1.2 1.2 1.2 1.2 Earnings Rev (%):Earnings Rev (%):Earnings Rev (%):Earnings Rev (%): (12) (6) (6) Consensus EPS Consensus EPS Consensus EPS Consensus EPS (sensensensen):::: 64.2 67.6 69.1

Other Broker Recs:Other Broker Recs:Other Broker Recs:Other Broker Recs: B: 2 S: 5 H: 14

Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P.

Asset quality blues

Flushing out issuesFlushing out issuesFlushing out issuesFlushing out issues; HOLD.; HOLD.; HOLD.; HOLD. What we saw in 1H16 was a realisation of our fears for Maybank (MAY). Asset quality concerns have been a feature in its Malaysian and Singapore operations. Two trends that continue to warrant attention is its relatively low loan loss coverage ratio and lower absolute dividend per share (despite keeping a high dividend payout). The dividend reinvestment plan (DRP) has served well to raise and preserve capital, but if this continues, profit growth must at least equal or exceed equity base growth to remain accretive. Management has made it clear that it plans to keep the DRP in view of capital requirements for certain events on the horizon. 2222Q16 earnings Q16 earnings Q16 earnings Q16 earnings further weakened on higher provisionsfurther weakened on higher provisionsfurther weakened on higher provisionsfurther weakened on higher provisions.... 2Q16 was further dented by higher provisions, which was largely expected given the volatility of the current environment. YTD credit cost stands at 46bps and NPL ratio at 2.3%, as restructured and rescheduled (R&R) loans were accelerated for its oil & gas (Singapore and Malaysia) and steel (Malaysia only) exposures. Impairment was made for a Singapore oil & gas bond issue. Loan growth has been slow while NIM fell q-o-q, crippling q-o-q topline growth. Despite strong growth in CASA, higher fixed deposit growth caused funding costs to rise. Non-interest income was flattish q-o-q but jumped y-o-y largely from the disposal of securities. DPS was lower at 20 sen (equivalent to 77% of 1H16 EPS). FY16 FY16 FY16 FY16 targets look difficult to achievetargets look difficult to achievetargets look difficult to achievetargets look difficult to achieve.... We think MAY’s 2016 guidance of 8-9% loan growth and 40-50bps credit cost are challenging to achieve. After our earnings cut, FY16F ROE is at 9%, which is below management’s 11-12% target. We raise our credit cost assumption to 70bps (from 49bps) and NPL ratio forecast to 2.2% (from 2.0%) for FY16F. We cut loan growth to 5% for FY16F. Our FY17-18F assumptions are also revised down. Overall, this resulted in a 6-12% cut to our FY16-18F earnings. Valuation: MAY is a HOLD with a lower target price of RM7.50 (RM8.60 previously) in the wake of our earnings revision and a shift in our valuation base to FY17 BV. Our TP is equivalent to 1.1x FY17 BV and based on the Gordon Growth Model (assuming 11% ROE, 4% growth and 10.2% cost of equity). Key Risks to Our View: Change in dividend payout.Change in dividend payout.Change in dividend payout.Change in dividend payout. MAY’s official dividend policy stands at 40-60%, but the payout has been above 70% because of the DRP. Should management decide to change the DRP, dividend yields could disappoint, and the stock could lose its appeal.

At A Glance Issued Capital (m shrs) 10,009

Mkt. Cap (RMm/US$m) 79,070 / 19,572

Major Shareholders (%)

Amanah Saham Bumiputera (%) 37.0 EPF (%) 15.7 Permodalan Nasional Bhd (%) 5.7

Free Float (%) 41.6

3m Avg. Daily Val (US$m) 22.9

ICB IndustryICB IndustryICB IndustryICB Industry : Financials / Banks

Malaysia Equity ResearcMalaysia Equity ResearcMalaysia Equity ResearcMalaysia Equity Researchhhh

26 Aug 2016

Company Guide

Maybank Version 4 | Bloomberg: MAY MK | Reuters: MBBM.KL Refer to important disclosures at the end of this report

Company Guide

Maybank

WHAT’S NEW

Another dent by provisions

HighlightsHighlightsHighlightsHighlights

2Q/1H16 earnings below expectations due to provisions. 2Q/1H16 earnings below expectations due to provisions. 2Q/1H16 earnings below expectations due to provisions. 2Q/1H16 earnings below expectations due to provisions. While

pre-provision profit was largely in-line, higher-than-expected

provisions however dented its bottomline. The higher

provisions arose from increased individual impairments (which

were largely expected given the volatility of the current

environment) and bond impairment from a Singapore oil & gas

company. YTD credit cost stood at 46bps. We understand that

32% of the higher provisions booked in 2Q16 of RM982m

were from newly impaired restructured and rescheduled (R&R)

loans. The impairment losses for financial assets of RM200m

were related to Swiber bonds.

Further deterioration in asset quality. Further deterioration in asset quality. Further deterioration in asset quality. Further deterioration in asset quality. Impaired loans ratio rose

to 2.3% (from 2.1% in 1Q16) as absolute NPLs grew by 13%

q-o-q. The uptick was mainly from increased R&R loans. R&R

loans climbed from 0.33% to 0.67% q-o-q as a result of the

bank’s deliberate efforts in extending a hand to customers

amid a weaker operating environment. By country, Malaysia

and Singapore impaired loans rose by 22% and 11%

respectively. We understand that 90% of the increase from its

Malaysian impaired loans was R&R-related loans, while within

the Singapore impaired loans, 75% of the increase was R&R

loans. These customers were mainly from oil & gas (Singapore

and Malaysia) and steel (Malaysia only) sectors. There were

also some from other sectors such as shipping, commodities

and agriculture. These accounts lie within the business and

corporate banking divisions of both its Singapore and

Malaysian operations. MAY’s exposure to oil & gas/agriculture/

metal and mining sectors stood at 4.2%/1.73%/1.50%,

respectively. More details on MAY’s gross impaired loans and

exposures can be found on page 3 of this report; excerpts

from the results presentation slides. Loan loss coverage was

unchanged q-o-q at 70% (74% including regulatory reserve).

Management alluded that the coverage ratio remains sufficient

up to a 72% open market value discount of its collaterals.

Including collaterals, we reckon that loan loss coverage would

be c.126%. The jury will be on the valuation of these

collaterals over time, depending on market conditions.

PrePrePrePre----provision profit within expectationprovision profit within expectationprovision profit within expectationprovision profit within expectation. Loan growth has been

slow (-1.8% YTD/ 2.1% q-o-q/ 4.3% y-o-y) while NIM fell q-o-

q, crippling q-o-q topline growth. Despite strong growth in

CASA (1.2% YTD/ 4.5% q-o-q/ 3% y-o-y), higher fixed deposit

growth (-1.1% YTD/ 1.4% q-o-q/ 7.1% y-o-y) caused funding

costs to rise. Loan-to-deposit ratio was relatively flat at c.93%.

Adjusting for the Islamic investment accounts into its deposit

base, the adjusted loan-to-deposit ratio would be 89%. Non-

interest income was flattish q-o-q but jumped y-o-y largely

from the disposal of securities. Expenses were relatively well

contained, resulting in cost-to-income ratio at sub-50% levels.

CCCCapital remains robust.apital remains robust.apital remains robust.apital remains robust. Its fully loaded CET1 ratio, assuming a

dividend reinvestment rate of 85%, stood at 13.2% (group)

and 12.3% (bank level), respectively. Interim DPS was lower at

20 sen (equivalent to 77% of 1H16 EPS). Management has

made it clear that it intends to keep the DRP in view of capital

requirements for certain events on the horizon. Nonetheless,

we highlight that while the dividend reinvestment plan (DRP)

has served well to raise and preserve capital, profit growth

must at least equal or exceed equity base growth to remain

accretive.

OutlookOutlookOutlookOutlook

FY16 targets look difficult to achieveFY16 targets look difficult to achieveFY16 targets look difficult to achieveFY16 targets look difficult to achieve; ; ; ; cutcutcutcut earnings by earnings by earnings by earnings by 6666----12121212%%%%....

While management intends to keep its FY16 targets, we think

MAY’s guidance of 8-9% loan growth and 40-50bps credit

cost are challenging to achieve. We raise our credit cost

assumption further to 70bps (from 49bps) and NPL ratio

forecast to 2.2% (from 2.0%) for FY16F. Correspondingly,

FY17F credit cost was also raised by 3bps to 43bps. We cut

loan growth to 5%/7% for FY16-17F (from 8%). After our

earnings cut, our FY16F ROE is at 9%, which is below

management’s 11-12% ROE target.

Valuation and recommendationValuation and recommendationValuation and recommendationValuation and recommendation

Our HOLD rating is Our HOLD rating is Our HOLD rating is Our HOLD rating is maintained but TP lowered to RM7.5maintained but TP lowered to RM7.5maintained but TP lowered to RM7.5maintained but TP lowered to RM7.50000

from RM8.60) post earnings and valuation base revision. Our

TP is based on 11% ROE, 4% growth and 10.3% cost of

equity. Out TP implies 1.1x FY17 BV. While dividend yields

remain attractive, asset quality would remain a key risk in our

view, limiting any share price upside.

Company Guide

Maybank

MAY: Gross impaired loan ratio composition

Source: Company

MAY: Commodities exposure as of 30 June 2016

Source: Company

Company Guide

Maybank

Quarterly / Interim Income Statement (RMm)

FY FY FY FY DecDecDecDec 2Q2Q2Q2Q2015201520152015 1Q1Q1Q1Q2016201620162016 2Q2Q2Q2Q2016201620162016 % chg yoy % chg yoy % chg yoy % chg yoy % chg qoq% chg qoq% chg qoq% chg qoq

Net Interest Income 2,680 2,903 2,879 7.4 (0.8)

Islamic Income 967 978 1,037 7.2 7.2

Non-Interest Income 1,241 1,511 1,430 15.2 (5.4)

Operating IncomeOperating IncomeOperating IncomeOperating Income 4,8884,8884,8884,888 5,3925,3925,3925,392 5,3465,3465,3465,346 9.49.49.49.4 (0.8)(0.8)(0.8)(0.8)

Operating Expenses (2,419) (2,620) (2,624) 8.5 0.1

PrePrePrePre----Provision ProfitProvision ProfitProvision ProfitProvision Profit 2,4702,4702,4702,470 2,7722,7722,7722,772 2,7222,7222,7222,722 10.210.210.210.2 (1.8)(1.8)(1.8)(1.8)

Provisions (395) (878) (1,181) 199.1 34.5

Associates 75.7 38.2 43.0 (43.2) 12.6

Exceptionals 0.0 0.0 0.0 nm nm

Pretax ProfitPretax ProfitPretax ProfitPretax Profit 2,1502,1502,1502,150 1,9311,9311,9311,931 1,5841,5841,5841,584 (26.3)(26.3)(26.3)(26.3) (18.0)(18.0)(18.0)(18.0)

Taxation (529) (480) (385) (27.3) (19.9)

Minority Interests (36.8) (24.2) (39.4) 6.9 63.0

Net ProfitNet ProfitNet ProfitNet Profit 1,5851,5851,5851,585 1,4271,4271,4271,427 1,1601,1601,1601,160 (26.8)(26.8)(26.8)(26.8) (18.7)(18.7)(18.7)(18.7)

Growth (%)

Net Interest Income Gth 2.9 (1.0) (0.8)

Net Profit Gth (6.8) (13.6) (18.7)

Key ratio (%)

NIM 2.28 2.34 2.23

NPL ratio 1.6 2.1 2.3

Loan-to deposit (adjusted) 95.4 89.9 88.5

Cost-to-income 49.5 48.6 49.1

Total CAR 15.8 17.9 19.2

Source of all data: Company, AllianceDBS

Company Guide

Maybank

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

NIM trends NIM trends NIM trends NIM trends still on downside biasstill on downside biasstill on downside biasstill on downside bias.... MAY saw it NIM decline

again in 2Q16. The OPR cut could result in further pressure to

its NIM. MAY’s strong CASA growth was however, offset by

high campaign fixed deposit rates, further exerting pressure to

its funding costs. Renewed competition in lending rates could

push NIM more toward a downside bias.

Sustainable fee income from core banking activities.Sustainable fee income from core banking activities.Sustainable fee income from core banking activities.Sustainable fee income from core banking activities. The

outlook remains cloudy for capital markets, which would drag

market-related income. However, the share of non-interest

income at MAY, which is largely driven by transactional fees

from core banking services, should remain stable. MAY’s solid

deposit franchise and high CASA share give it a natural

advantage over peers to strengthen its transaction banking

segment. MAY’s recurring fee income is high at close to 60% of

non-interest income. Growing fee-based income remains a

strategic priority for MAY.

11111111----12% ROE12% ROE12% ROE12% ROE a difficult target to achievea difficult target to achievea difficult target to achievea difficult target to achieve.... We expect FY16 loan

growth to moderate to 5%. Along with NIM compression

(albeit smaller in quantum vs FY15) and high credit cost, we

expect ROE to be below 10%. Positively, operating costs should

remain well contained. However, slower profit growth coupled

with the expanded equity base arising from the DRP would drag

ROE lower.

Outlook remains uncertain Outlook remains uncertain Outlook remains uncertain Outlook remains uncertain for its regionalfor its regionalfor its regionalfor its regional operationsoperationsoperationsoperations.... Maybank

Singapore contributes c.16% to group PBT and MAY is the only

Malaysian bank with a Qualified Full Banking (QFB) licence in

Singapore. Over in Indonesia, MAY is represented by PT Bank

Maybank Indonesia Tbk (formerly known as Bank Internasional

Indonesia). Maybank Indonesia which used to contribute c.8%

to group PBT has seen its operations stabilising. However, the

outlook for Indonesia banks remains uncertain as the

momentum has yet to pick up. We conservatively expect

Maybank Indonesia’s earnings to remain sluggish as it focuses

on fixing its books and dealing with costs. Our concern lies with

its Singapore operations which have loans extended to the oil &

gas sector, which continues to remain under pressure.

MAY has presence in 18 other countriesMAY has presence in 18 other countriesMAY has presence in 18 other countriesMAY has presence in 18 other countries, but individual

contributions will remain small in the near future. MAY has also

started work to get a toehold in Myanmar following the Central

Bank of Myanmar’s decision to grant a foreign banking licence

in 2014. Overseas operations (ex-Singapore and Indonesia)

contributed c.8% to group PBT in FY15.

Margin Trends

Gross Loan& Growth

Customer Deposit & Growth

Loan-to-Deposit Ratio Trend

Cost & Income Structure

Source: Company, AllianceDBS

Company Guide

Maybank

Balance Sheet:

Cautious on asset quality.Cautious on asset quality.Cautious on asset quality.Cautious on asset quality. YTD, MAY has reported blips in NPL.

All eyes will remain on the bank’s asset quality position,

particularly on its oil & gas and steel exposure. Further

deterioration could pose downside risk to earnings. Credit costs

are likely to remain elevated at current levels in FY16F.

DRP supporting capital ratios.DRP supporting capital ratios.DRP supporting capital ratios.DRP supporting capital ratios. MAY’s capital ratios are high

compared to peers. This is aided by the DRP, which MAY will

continue to utilise as a strategic capital management tool to

build capital, rather than the rights issue option taken by some

of its peers. The DRP has served well to raise and preserve

capital, but if this continues, profit growth must at least equal

or exceed equity base growth to remain accretive. Management

has made it clear that it intends to keep the DRP in view of

capital requirements for certain events on the horizon.

Attractive dividend yield.Attractive dividend yield.Attractive dividend yield.Attractive dividend yield. Maybank has generously paid out

above 70% of profits since FY10, well above its dividend policy

of 40-60%. MAY intends to maintain this level of dividend

payout as long as the DRP remains in place. We have assumed

dividend payout to be c.75%.

Share Price Drivers:

Asset quality concerns weigh on valuatiAsset quality concerns weigh on valuatiAsset quality concerns weigh on valuatiAsset quality concerns weigh on valuatioooonsnsnsns.... Currently trading

at 1.2x FY16 BV, MAY is trading close to -2SD of its 10-year

mean P/BV. We believe valuations are weighed down by

concerns over the bank’s asset quality. Re-rating catalysts could

come from a recovery of its Indonesian operations and the

easing of asset quality concerns.

Key Risks:

Asset quality upsetAsset quality upsetAsset quality upsetAsset quality upset.... Further asset quality deterioration could

pose downside risks to our recommendation, target price and

earnings.

Change Change Change Change in dividend policy.in dividend policy.in dividend policy.in dividend policy. A lower dividend payout ratio could

cause MAY to lose its appeal as a yield stock.

Company Background

Malayan Banking Berhad provides commercial and Islamic

banking services in Malaysia, Singapore, and other locations. It

also owns an Indonesian subsidiary from an acquisition it made

in 2008. Through its subsidiaries, the bank provides services

such as general and life insurance, stock and futures broking,

and leasing and factoring

Asset Quality

Capitalisation (%)

ROE (%)

Forward PE Band (x)

PB Band (x)


Company Guide

Maybank

Key Assumptions

FY FY FY FY DecDecDecDec 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF 2018201820182018FFFF

Gross Loans Growth 13.3 12.3 5.0 7.0 8.0

Customer Deposits Growth 11.1 8.8 8.0 8.0 8.0

Yld. On Earnings Assets 3.2 3.2 3.1 3.1 3.1

Avg Cost Of Funds 1.6 1.5 1.6 1.6 1.6

Income Statement (RMm)


Net Interest Income 9,704 11,114 11,295 11,610 12,368

Islamic Income 3,271 3,939 4,254 4,594 4,962

Non-Interest Income 5,556 6,185 6,288 6,602 6,932

Operating IncomeOperating IncomeOperating IncomeOperating Income 18,53118,53118,53118,531 21,23821,23821,23821,238 21,83621,83621,83621,836 22,80622,80622,80622,806 24,26124,26124,26124,261

Operating Expenses (9,111) (10,285) (10,799) (11,339) (11,906)

PrePrePrePre----provision Profitprovision Profitprovision Profitprovision Profit 9,4199,4199,4199,419 10,95310,95310,95310,953 11,03711,03711,03711,037 11,46711,46711,46711,467 12,35512,35512,35512,355

Provisions (471) (2,013) (3,391) (2,237) (2,094)

Associates 163 211 222 233 245

Exceptionals 0.0 0.0 0.0 0.0 0.0

PrePrePrePre----tax Profittax Profittax Profittax Profit 9,1129,1129,1129,112 9,1529,1529,1529,152 7,8687,8687,8687,868 9,4629,4629,4629,462 10,50610,50610,50610,506

Taxation (2,201) (2,165) (1,967) (2,366) (2,626)

Minority Interests (195) (150) (129) (155) (173)

Preference Dividend 0.0 0.0 0.0 0.0 0.0

Net ProfitNet ProfitNet ProfitNet Profit 6,7166,7166,7166,716 6,8366,8366,8366,836 5,7725,7725,7725,772 6,9426,9426,9426,942 7,7077,7077,7077,707

Net Profit bef Except 6,716 6,836 5,772 6,942 7,707

Growth (%)

Net Interest Income Gth 1.2 14.5 1.6 2.8 6.5

Net Profit Gth 2.5 1.8 (15.6) 20.3 11.0

Margins, Costs & Efficiency (%)

Spread 1.6 1.6 1.5 1.5 1.5

Net Interest Margin 2.3 2.4 2.3 2.3 2.3

Cost-to-Income Ratio 49.2 48.4 49.5 49.7 49.1

Business Mix (%)

Net Int. Inc / Opg Inc. 52.4 52.3 51.7 50.9 51.0

Non-Int. Inc / Opg inc. 30.0 29.1 28.8 28.9 28.6

Fee Inc / Opg Income 7.7 6.9 6.8 6.7 6.4

Oth Non-Int Inc/Opg Inc 22.3 22.3 22.0 22.3 22.2

Profitability (%)

ROAE Pre Ex. 13.6 11.9 9.0 10.2 10.9

ROAE 13.6 11.9 9.0 10.2 10.9

ROA Pre Ex. 1.2 1.0 0.8 0.9 0.9

ROA 1.2 1.0 0.8 0.9 0.9


Earnings weighed by high credit cost

Company Guide

Maybank

Quarterly / Interim Income Statement (RMm)

FY FY FY FY DecDecDecDec 2Q2Q2Q2Q2015201520152015 3Q3Q3Q3Q2015201520152015 4Q4Q4Q4Q2015201520152015 1Q1Q1Q1Q2016201620162016 2Q2Q2Q2Q2016201620162016

Net Interest Income 2,680 2,897 2,932 2,903 2,879

Islamic Income 967 1,085 954 978 1,037

Non-Interest Income 1,241 1,766 1,728 1,511 1,430

Operating IncomeOperating IncomeOperating IncomeOperating Income 4,8884,8884,8884,888 5,7475,7475,7475,747 5,6155,6155,6155,615 5,3925,3925,3925,392 5,3465,3465,3465,346

Operating Expenses (2,419) (2,601) (2,776) (2,620) (2,624)

PrePrePrePre----Provision ProfitProvision ProfitProvision ProfitProvision Profit 2,4702,4702,4702,470 3,1463,1463,1463,146 2,8392,8392,8392,839 2,7722,7722,7722,772 2,7222,7222,7222,722

Provisions (395) (797) (522) (878) (1,181)

Associates 75.7 34.2 59.0 38.2 43.0

Exceptionals 0.0 0.0 0.0 0.0 0.0

Pretax ProfitPretax ProfitPretax ProfitPretax Profit 2,1502,1502,1502,150 2,3832,3832,3832,383 2,3762,3762,3762,376 1,9311,9311,9311,931 1,5841,5841,5841,584

Taxation (529) (457) (649) (480) (385)

Minority Interests (36.8) (26.8) (75.3) (24.2) (39.4)

Net ProfitNet ProfitNet ProfitNet Profit 1,5851,5851,5851,585 1,8991,8991,8991,899 1,6521,6521,6521,652 1,4271,4271,4271,427 1,1601,1601,1601,160

Growth (%)

Net Interest Income Gth 2.9 8.1 1.2 (1.0) (0.8)

Net Profit Gth (6.8) 19.8 (13.0) (13.6) (18.7)

Balance Sheet (RMm)


Cash/Bank Balance 52,853 55,647 51,248 52,809 48,728

Government Securities 3,625 7,692 8,461 9,308 10,238

Inter Bank Assets 16,106 13,618 14,299 15,014 15,765

Total Net Loans & Advs. 403,513 453,493 474,790 508,086 548,850

Investment 115,911 122,166 134,383 147,821 162,603

Associates 2,528 3,121 3,342 3,575 3,820

Fixed Assets 3,284 3,378 3,547 3,654 3,763

Goodwill 6,261 6,958 6,958 6,958 6,958

Other Assets 31,247 37,915 45,056 52,977 62,625

Total AssetsTotal AssetsTotal AssetsTotal Assets 640,300640,300640,300640,300 708,345708,345708,345708,345 746,658746,658746,658746,658 805,004805,004805,004805,004 868,394868,394868,394868,394

Customer Deposits 439,569 478,151 516,403 557,715 602,332

Inter Bank Deposits 57,387 39,014 40,965 43,013 45,163

Debts/Borrowings 40,064 56,945 62,049 67,664 73,840

Others 23,739 46,882 32,470 36,237 40,589

Minorities 1,767 1,818 1,947 2,102 2,275

Shareholders' Funds 52,975 61,695 66,602 69,427 72,465

Total Liab& S/H’s FundsTotal Liab& S/H’s FundsTotal Liab& S/H’s FundsTotal Liab& S/H’s Funds 640,300640,300640,300640,300 708,345708,345708,345708,345 746,658746,658746,658746,658 805,004805,004805,004805,004 868,394868,394868,394868,394


2Q16 net profit dented by higher provisions

Company Guide

Maybank

Financial Stability Measures (%)


Balance Sheet Structure

Loan-to-Deposit Ratio 91.8 94.8 91.9 91.1 91.1

Net Loans / Total Assets 63.0 64.0 63.6 63.1 63.2

Investment / Total Assets 18.1 17.2 18.0 18.4 18.7

Cust . Dep./Int. Bear. Liab. 81.9 83.3 83.4 83.4 83.5

Interbank Dep / Int. Bear. 10.7 6.8 6.6 6.4 6.3

Asset Quality

NPL / Total Gross Loans 1.5 1.9 2.2 2.0 1.9

NPL / Total Assets 1.0 1.2 1.4 1.3 1.2

Loan Loss Reserve Coverage 95.6 72.0 73.9 80.7 83.8

Provision Charge-Off Rate 0.1 0.4 0.7 0.4 0.4

Capital Strength

Total CAR 15.3 16.7 17.5 16.7 16.1

Tier-1 CAR 12.0 13.1 14.1 13.5 13.2


Target Price & Ratings History

Source: AllianceDBS

Analyst: Malaysian Research Team

Lynette Cheng

Loan loss coverage at a new low

Company Guide

Maybank

DISCLOSURE

Stock rating definitions STRONG BUY - > 20% total return over the next 3 months, with identifiable share price catalysts within this time frame BUY - > 15% total return over the next 12 months for small caps, >10% for large caps HOLD - -10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps FULLY VALUED - negative total return > -10% over the next 12 months SELL - negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date

Company Guide

Maybank

DISCLAIMER

This report has been prepared for information purposes only by AllianceDBS Research Sdn Bhd (“ADBSR”), a subsidiary of Alliance Investment Bank Berhad (“AIBB”) and an associate of DBS Vickers Securities Holdings Pte Ltd (“DBSVH”). DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. This report is strictly confidential and is meant for circulation to clients of ADBSR, AIBB and DBSVH only or such persons as may be deemed eligible to receive such research report, information or opinion contained herein. Receipt and review of this report indicate your agreement not to distribute, reproduce or disclose in any other form or medium (whether electronic or otherwise) the contents, views, information or opinions contained herein without the prior written consent of ADBSR. This report is based on data and information obtained from various sources believed to be reliable at the time of issuance of this report and any opinion expressed herein is subject to change without prior notice and may differ or be contrary to opinions expressed by ADBSR’s affiliates and/or related parties. ADBSR does not make any guarantee, representation or warranty (whether express or implied) as to the accuracy, completeness, reliability or fairness of the data and information obtained from such sources as may be contained in this report. As such, neither ADBSR nor its affiliates and/or related parties shall be held liable or responsible in any manner whatsoever arising out of or in connection with the reliance and usage of such data and information or third party references as may be made in this report (including, but not limited to any direct, indirect or consequential losses, loss of profits and damages). The views expressed in this report reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendation(s) or view(s) in this report. ADBSR prohibits the analyst(s) who prepared this report from receiving any compensation, incentive or bonus based on specific investment banking transactions or providing a specific recommendation for, or view of, a particular company. This research report provides general information only and is not to be construed as an offer to sell or a solicitation to buy or sell any securities or other investments or any options, futures, derivatives or other instruments related to such securities or investments. In particular, it is highlighted that this report is not intended for nor does it have regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive this report. Investors are therefore advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situations and particular needs and consult their own professional advisers (including but not limited to financial, legal and tax advisers) regarding the appropriateness of investing in any securities or investments that may be featured in this report. ADBSR, AIBB, DBSVH and DBS Bank Ltd, their directors, representatives and employees or any of their affiliates or their related parties may, from time to time, have an interest in the securities mentioned in this report. AIBB, DBSVH and DBS Bank Ltd, their affiliates and/or their related persons may do and/or seek to do business with the company(ies) covered in this report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell or buy such securities from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. AIBB, DBSVH, DBS Bank Ltd (which carries on, inter alia, corporate finance activities) and their activities are separate from ADBSR. AIBB, DBSVH and DBS Bank Ltd may have no input into company-specific coverage decisions (i.e. whether or not to initiate or terminate coverage of a particular company or securities in reports produced by ADBSR) and ADBSR does not take into account investment banking revenues or potential revenues when making company-specific coverage decisions. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc (“DBSVUSA”), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the subject company mentioned in this report. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBSVUSA may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this report should contact DBSVUSA exclusively. DBS Vickers Securities (UK) Ltd is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the overriding issue of confidentiality, available upon request to enable an investor to make their own independent evaluation of the information contained herein.

Wong Ming Tek, Executive Director

Published by

AllianceDBS Research Sdn Bhd AllianceDBS Research Sdn Bhd AllianceDBS Research Sdn Bhd AllianceDBS Research Sdn Bhd (128540 U)

19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia.

Tel.: +603 2604 3333 Fax: +603 2604 3921 email : [email protected]

company guide maybank · 2222q16 earnings q16 earnings q16 earnings further weakened on higher...

Documents