rm relative index maybank bancassurance distribution network thanks to may’s strong branch...

ASIAN INSIGHTS VICKERS SECURITIES ed: JS / sa: BC, PY

BUY (Upgrade from HOLD)

Last Traded Price ( 19 Apr 2017): RM9.05 (KLCI : 1,738.95)

Price Target 12-mth : RM10.00 (10% upside) (Prev RM8.00)

Analyst Sue Lin LIM +65 8332 6843 [email protected] Lynette CHENG +60 32604 3907 [email protected]

What’s New ETIQA and MAY ISL are hidden jewels; market

mispricing MAY’s ability to unlock shareholder

value

Gradual improvement in core earnings expected;

positive capital markets momentum an added

boost; MAY INDO chugging along

Earnings raised by 4-6% on lower credit cost and

higher non-interest income

Upgrade to BUY; TP raised to RM10.00; spinoffs

could add RM0.40 to TP

Price Relative

Forecasts and Valuation FY Dec (RMm) 2016A 2017F 2018F 2019F

Pre-prov. Profit 11,686 12,012 12,832 14,046 Net Profit 6,743 7,216 7,855 8,833 Net Pft (Pre Ex.) 6,743 7,216 7,855 8,833 Net Pft Gth (Pre-ex) (%) (1.4) 7.0 8.9 12.4 EPS (sen) 67.6 70.1 74.8 82.5 EPS Pre Ex. (sen) 67.6 70.1 74.8 82.5 EPS Gth Pre Ex (%) (6) 4 7 10 Diluted EPS (sen) 66.2 69.4 74.1 81.7 PE Pre Ex. (X) 13.4 12.9 12.1 11.0 Net DPS (sen) 52.0 53.4 57.0 62.9 Div Yield (%) 5.7 5.9 6.3 6.9 ROAE Pre Ex. (%) 10.4 10.1 10.2 10.5 ROAE (%) 10.4 10.1 10.2 10.5 ROA (%) 1.0 1.0 1.0 1.1 BV Per Share (sen) 672 714 759 809 P/Book Value (x) 1.3 1.3 1.2 1.1 Earnings Rev (%): 4 4 6 Consensus EPS (sen): 67.4 70.4 74.8

Other Broker Recs: B: 10 S: 3 H: 11

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

Reduced uncertainties

Gradual earnings improvement expected; upgrade to BUY. We

have reduced our credit cost assumption to 46/42/37bps over

FY17-19 (from 50/44/37bps) given the improving economic

outlook (firmer commodity prices and exchange rate). This

remains high vs its 10-year historical average of 40bps as we

believe Maybank (MAY) still has some corners to turn before a

more pronounced improvement in earnings traction is seen.

Some restructuring and rescheduling (R&R) of loans may still

take place in the coming quarters, causing gross impaired ratio

to remain elevated. We have also raised non-interest income

growth as the positive momentum from capital markets should

give a boost to fee income. These collectively led us to raise

FY17-19F earnings by 4-6%.

Where we differ. First take on MAY’s sum-of-parts valuation.

Spinoff rumours have sparked interest in evaluating the

potential value unlocked when each of MAY’s business is

assessed individually. We believe Etiqa Insurance (ETIQA) and

Maybank Islamic (MAY ISL) are jewels within the group whose

values could be crystallised. Assuming these get listed, there

could be another RM0.40 upside to our current TP.

Potential Catalyst. Sentiment may boost valuation. Our analysis

of the valuation trends exhibited during the year of the past

three general elections shows that barring an event risk, there

are more pronounced movements in the valuations of MAY and

CIMB compared to the other banks. Assuming a potential

valuation premium of 0.3x BV for MAY, we still see upside

potential from current share price.

Valuation:

Upgrade to BUY, TP raised to RM10.00 post earnings

adjustments. Our TP is equivalent to 1.5x FY17 BV, based on the

Gordon Growth Model (assuming 11% ROE, 4% growth and

9.5% cost of equity). Our TP is further substantiated by the

sum-of-parts method.

Key Risks to Our View:

Negative surprises in asset quality may pose downside risk to

earnings forecast. Based on our sensitivity analysis, every 10bps

reduction in credit cost increases net profit by 6%.

At A Glance Issued Capital (m shrs) 10,183

Mkt. Cap (RMm/US$m) 92,155 / 20,890

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) 26.5

ICB Industry : Financials / Banks

DBS Group Research . Equity

20 Apr 2017

Malaysia Company Guide

Maybank Version 7 | Bloomberg: MAY MK | Reuters: MBBM.KL Refer to important disclosures at the end of this report

72

92

112

132

152

172

192

212

6.8

7.8

8.8

9.8

10.8

11.8

Apr-13 Apr-14 Apr-15 Apr-16 Apr-17

Relative IndexRM

Maybank (LHS) Relative KLCI (RHS)

ASIAN INSIGHTS VICKERS SECURITIES

Company Guide

Maybank

WHAT’S NEW

Renewed avenues to unlock value

Sum of its parts add a whole lot of value

Potential corporate action led by Permodalan Nasional Berhad

(PNB). PNB, the country’s largest fund-management

company, has embarked on an exercise to unlock value in its

companies, encouraged by the substantial rise in market

values of its six main listed entities. It has since been busy

with the Sime Darby and UMW Holdings de-merger, and

more recently, the amalgamation of SP Setia with the unlisted

I&P Group. Rumours have surfaced that MAY could be its

next project. Under the group, there are two public listed

companies (Maybank Indonesia and MCB Bank) and two

operating entities with listing potential (MAY ISL and ETIQA).

Value behind ETIQA. MAY owns 69% of Maybank Ageas

Holdings, of which its main operating entities are Etiqa

Insurance and Etiqa Takaful. The Etiqa group offers life and

general insurance as well as takaful products in Malaysia,

Singapore and the Philippines. The revenue mix (by gross

premium) is 51:49 for life and general insurance and 56:44

for conventional and takaful. ETIQA has a comprehensive

distribution network, with an agency force of over 10,000

agents, 28 branches throughout Malaysia, and a wide

bancassurance distribution network thanks to MAY’s strong

branch presence. In our sum-of-parts (SOP) valuation, we

imputed 1.5x BV for ETIQA, supported by its strong market

share in both life and general business. Based on latest

available data, ETIQA holds the top position in General

Insurance and Takaful with 13% market share, and 4th in

Life/Family with 9% market share of new business premiums.

The closest listed comparison to ETIQA is Allianz Malaysia

(ALLZ MK), which also has strong market shares in both life

and general insurance. Allianz Malaysia is trading at about

1.2x BV. The most recent M&A transaction for an insurer with

a composite license is MCIS insurance, which fetched a

valuation of 1.7x BV.

MAY ISL is well-positioned to lead in the internationalisation

of Islamic finance as it is the nation’s biggest bank (both

Islamic and conventional) with the most extensive regional

reach. In 2011, MAY ISL rolled out the “Islamic First” strategy

in Malaysia, where customers were offered Islamic banking

products as the first choice. Its efforts came to fruition as

MAY ISL’s proportion of financing to the group surpassed the

50% mark in FY15 (from 39% in FY13). MAY ISL emulated

the “Islamic First” strategy in Indonesia in 2014. This, along

with initiatives such as increasing the awareness of Shariah

products and services, a revamp of Shariah offerings and

expansion of distribution network (through conversion of

conventional-only branches to dual branches offering both

conventional and Shariah products), improved Bank Maybank

Indonesia Unit Usaha Shariah industry’s ranking from 12th in

FY13 to 5th in FY16, in terms of asset size. Over in Singapore,

MAY ISL pioneered several products in the market such as a

special savings account for the Hajj pilgrimage, Islamic Auto

Finance, Malaysia Residential Property Financing and Malaysia

Commercial & Industrial Property Financing in 2013, and

Islamic Business Term Financing and Islamic trade facilities and

foreign currency deposits in 2014. In our sum-of-parts

valuation, we valued Maybank Islamic at 1.9x BV, on par with

our valuation basis for BIMB. We believe this is fair as MAY

ISL’s regional reach makes up for its lack in asset quality

resilience (impaired financing saw almost a two-fold increase

y-o-y in FY16). Refer to report titled Malaysian Islamic Banks:

The unconventional banking aspect for more details on the

Islamic banking industry.

Maybank Indonesia chugging along. Maybank Indonesia

posted a respectable set of results in FY16, lifted by higher

NIM and lower provisions. Impaired loans ratio was lower y-o-

y. We saw its strategic cost management programme bearing

fruits as cost-to-income dipped to 52%, the lowest in its

history. Compared to CIMB Niaga, Maybank Indonesia’s

guidance for FY17 appears more optimistic with ROE of 10-

11%, loan growth of 10-12%, deposit growth of 8-10%,

NIM compression of 15-20bps, and credit cost of c.130bps.

The bank targets to grow its business banking division by

participating in financing of infrastructure projects by the

government and a focus on SMEs. Meanwhile, Maybank

Indonesia is refining its focus within the retail segment.

Maybank Indonesia is also taking measures to boost

capitalisation. The bank disposed its 68.55% stake in Wahana

Ottomitra Multiartha Tbk (WOM Finance) and is planning to

undertake a rights issue of Rp1.5-2tr in 2H17. We imputed

Maybank Indonesia’s current market value in our SOP

valuation.

MCB Bank; MAY’s 20%-owned associate: Maybank acquired

a 20% stake in MCB Bank, one of the leading banks in

Pakistan, back in 2008. MCB is listed on the Pakistan Stock

Exchange and has a market capitalisation of more than PKR

200bn (c.RM10bn). In FY16, MCB’s net profit declined due to

lower net interest income as a result of lower NIM. Similar to

Maybank Indonesia, we imputed current market value of

MCB Bank in our SOP valuation.

Spinoffs could add RM0.40 to our current TP. We see

potential for more value creation when these entities are

assessed individually and would not discount the possibility of

a spinoff taking place. That said, there is timing and event risk

to such corporate actions.

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Company Guide

Maybank

Valuation and recommendation:

Upgrade to BUY, TP raised to RM10.00 post earnings

adjustments. We have reduced our credit cost assumption to

46/42/37bps over FY17-19 (from 50/44/37bps) given the

improving economic outlook (firmer commodity prices and

exchange rate). This still remains high vs its 10-year historical

average of 40bps as we believe MAY still has some corners to

turn before a pronounced improvement in earnings traction

can be seen. Some restructuring and rescheduling (R&R) of

loans may still be expected in coming quarters. We have also

raised non-interest income growth as the positive momentum

from capital markets should give a boost to fee income.

These collectively led us to raise FY17-19F earnings by 4-6%.

Consequently, we arrive at a higher RM10.00 TP (from

RM8.00), which is equivalent to 1.5x FY17 BV and based on

the Gordon Growth Model (assuming 11% ROE, 4% growth

and 9.5% cost of equity).

Possible DRP tweak. Its high dividend yield is appealing. We

expect MAY to continue with its Dividend Reinvestment Plan

(DRP). The DRP has successfully positioned MAY to be one of

the best capitalised bank among its Malaysian banking peers.

However, this did come at the expense of ROE. We expect

the electable cash and share portion to be tweaked (more

cash going forward) thereby limiting further substantial ROE

dilution.

Added boost to valuations. An analysis of the valuation trends

exhibited during the year of the past three general elections

shows that barring an event risk, there are more pronounced

movements in the valuations of heavyweights such as MAY

and CIMB compared to the other banks. Assuming a

potential valuation premium of 0.3x BV for MAY, we still see

apparent upside potential from current share price.

Separately, the possible listing of its insurance unit (ETIQA)

and Islamic banking arm (MAY ISL) could see latent value

being unlocked within the group.


Company Guide

Maybank

MAY: Sum-of-parts valuation

Stake Value Comment

(%) (RMm)

MAY (ex Maybank Ageas, MAY ISL, Maybank Indonesia and MCB) 100 75,742 Based on 1.4x FY17F BV

Maybank Ageas 69.1 5,265 Based on 1.5x FY16 BV

MAY ISL

100 17,268 Based on 1.9x FY16 BV

Maybank Indonesia 97.5 7,417 Current market cap

MCB

20 2,038 Current market cap

Total value

107,730 No of shares (m shares, FY17F)

10,397

Value per share

10.40 Source: DBS Bank, AllianceDBS, Company

MAY: Shareholding structure

Source: DBS Bank, AllianceDBS, Company

6% 36% 15% 43%

100% 69% 100% 100%

100% 100% 100% 100%

100% 100% 100%

100% 100% 100%

98% 100% 100%

98% 100%

20% 100%

20%

100%

100%

Etiqa Offshore

Insurance (L) Ltd

Etiqa Overseas

Investment Pte Ltd

Asset Management

BinaFikir

Maybank Asset

Management

Maybank Islamic

Asset Management

Maybank Islamic

Maybank

International (L) Ltd.

Maybank Ageas

Maybank Private

Equity

Maybank Asset

Management (Thai)

Maybank Asset

Management

Singapore

Skim Amanah Saham

BumiputeraPublic

Maybank

Investment Bank

Etiqa Insurance

Investment Banking

Employees

Provident Fund

MCB Bank Limited

An Binh Commercial

Joint Stock Bank

Maybank (Cambodia)

Plc

Uzbek Leasing

International A.O.

Banking Insurance

PT Bank Maybank

Syariah Indonesia

Bank Internasional

Indonesia

Etiqa Insurance Pte

Ltd

Etiqa Life

International (L) Ltd

Permodalan Nasional

Bhd

Ma la ya n Ba nking Be rha d

Maybank (PNG)

Limited

Maybank Philippines

Incorporated

Etiqa Takaful


Company Guide

Maybank

CRITICAL FACTORS TO WATCH

Earnings Drivers:

NIM trends still on downside bias. Backed by a strong deposit

franchise, MAY is in a better position than peers to manage

funding cost pressure. MAY’s CASA ratio of more than 35% is

the highest in the industry. Management has guided for 5-

10bps slippage in FY17.

Sustainable fee income from core banking activities. Capital

market-related activities have started to pick-up since early

2017, which bodes well for MAY’s non-interest income.

Separately, 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. Growing fee-based income

remains a strategic priority for MAY.

Guiding for ROE of 10-11%. With better containment in NIM

slippage, improvement in loan growth traction and lower credit

cost, we expect y-o-y earnings growth to rebound in FY17.

MAY’s Dividend Reinvestment Plan (DRP) has diluted ROE, but

we expect it to be managed by tweaking the electable cash and

share portion (more cash going forward).

Outlook remains uncertain for its regional operations. Maybank

Singapore historically contributes c.16% to group pretax 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 pretax has seen its

operations stabilising. However, the outlook for Indonesia banks

remains uncertain as the momentum has yet to pick up. Our

concern lies with its Singapore operations which have loans

extended to the oil & gas sector, which continues to be under

pressure.

MAY 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.4% to group pretax in FY16.

Margin Trends

Gross Loan& Growth

Customer Deposit & Growth

Loan-to-Deposit Ratio Trend

Cost & Income Structure

Source: Company, DBS Bank, AllianceDBS

2.2%

2.2%

2.3%

2.3%

2.4%

2.4%

2.5%

2.5%

2.6%

2.6%

0

2,000

4,000

6,000

8,000

10,000

12,000

2015A 2016A 2017F 2018F 2019F

RM m

Net Interest Income Net Interest Income Margin

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

100,000

200,000

300,000

400,000

500,000

2015A 2016A 2017F 2018F 2019F

RM m

Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

100,000

200,000

300,000

400,000

500,000

600,000

2015A 2016A 2017F 2018F 2019F

RM m

Customer Deposits (LHS)

Customer Deposits Growth (%) (YoY) (RHS)

85%

90%

95%

100%

105%

408,143

458,143

508,143

558,143

608,143

658,143

2015A 2016A 2017F 2018F 2019F

RM bn

Loans Deposit Loan-to-Deposit Ratio (RHS)

44.0%

44.5%

45.0%

45.5%

46.0%

46.5%

47.0%

47.5%

48.0%

48.5%

49.0%

0

5,000

10,000

15,000

20,000

25,000

2015A 2016A 2017F 2018F 2019F

Net Interest Income Non-interest Income

Islamic Banking Income Cost-to-income Ratio


Company Guide

Maybank

Balance Sheet:

Cautious on asset quality. MAY has reported blips in impaired

loans ratio over FY16. All eyes will remain on the bank’s asset-

quality position, particularly on its oil & gas exposure. Credit

costs are likely to remain elevated. Negative surprises in asset

quality may pose downside risk to earnings forecast. Based on

our sensitivity analysis, every 10bps reduction in credit cost

increases net profit by 6%.

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. MAY 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 remain high in FY17-19F.

Share Price Drivers:

Improvement in sentiments and potential listings. An analysis of

the valuation trends exhibited on the year of the past three

general elections shows that barring an event risk, there are

more pronounced movements in the valuations of heavyweights

such as MAY and CIMB compared to the other banks.

Assuming a potential valuation premium of 0.3x BV for MAY,

we still see apparent upside potential from current share price.

Separately, the possible listing of its insurance unit (ETIQA) and

Islamic banking arm (Maybank Islamic) could see latent value

being unlocked within the group.

Key Risks:

Asset-quality upset. Further asset-quality deterioration could

pose downside risks to our recommendation, target price and

earnings.

Change 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)


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2015A 2016A 2017F 2018F 2019F

NPL Ratio Provision Charge-Off Rate

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

21.0%

2015A 2016A 2017F 2018F 2019F

Tier-1 CAR Total CAR

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2015A 2016A 2017F 2018F 2019F

Avg: 12.8x

+1sd: 13.6x

+2sd: 14.4x

-1sd: 12x

-2sd: 11.2x

9.7

10.7

11.7

12.7

13.7

14.7

15.7


(x)

Avg: 1.57x

+1sd: 1.85x

+2sd: 2.14x

-1sd: 1.29x

-2sd: 1.01x0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3


(x)


Company Guide

Maybank

Key Assumptions

FY Dec 2015A 2016A 2017F 2018F 2019F

Gross Loans Growth 12.3 5.7 7.0 7.0 7.0

Customer Deposits Growth 8.8 2.4 7.0 7.0 7.0

Yld. On Earnings Assets 3.2 3.1 3.1 3.1 3.1

Avg Cost Of Funds 1.5 1.6 1.6 1.6 1.7

Income Statement (RMm)

FY Dec 2015A 2016A 2017F 2018F 2019F

Net Interest Income 11,114 11,568 11,744 12,002 12,712

Islamic Income 3,939 4,189 4,399 4,707 5,036

Non-Interest Income 6,185 6,506 6,586 7,377 8,114

Operating Income 21,238 22,263 22,730 24,086 25,862

Operating Expenses (10,285) (10,577) (10,717) (11,253) (11,816)

Pre-provision Profit 10,953 11,686 12,012 12,832 14,046

Provisions (2,013) (3,015) (2,377) (2,336) (2,229)

Associates 211 173 182 191 201

Exceptionals 0.0 0.0 0.0 0.0 0.0

Pre-tax Profit 9,152 8,844 9,818 10,688 12,018

Taxation (2,165) (1,881) (2,356) (2,565) (2,884)

Minority Interests (150) (221) (245) (267) (301)

Preference Dividend 0.0 0.0 0.0 0.0 0.0

Net Profit 6,836 6,743 7,216 7,855 8,833

Net Profit bef Except 6,836 6,743 7,216 7,855 8,833

Growth (%)

Net Interest Income Gth 14.5 4.1 1.5 2.2 5.9

Net Profit Gth 1.8 (1.4) 7.0 8.9 12.4

Margins, Costs & Efficiency (%)

Spread 1.6 1.5 1.5 1.4 1.4

Net Interest Margin 2.4 2.4 2.3 2.3 2.3

Cost-to-Income Ratio 48.4 47.5 47.2 46.7 45.7

Business Mix (%)

Net Int. Inc / Opg Inc. 52.3 52.0 51.7 49.8 49.2

Non-Int. Inc / Opg inc. 29.1 29.2 29.0 30.6 31.4

Fee Inc / Opg Income 6.9 6.7 6.7 6.4 6.1

Oth Non-Int Inc/Opg Inc 22.3 22.5 22.3 24.2 25.3

Profitability (%)

ROAE Pre Ex. 11.9 10.4 10.1 10.2 10.5

ROAE 11.9 10.4 10.1 10.2 10.5

ROA Pre Ex. 1.0 1.0 1.0 1.0 1.1

ROA 1.0 1.0 1.0 1.0 1.1


Expect provisions to slow, but remain elevated


Company Guide

Maybank

Quarterly / Interim Income Statement (RMm)

FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016

Net Interest Income 2,932 2,903 2,879 2,828 2,959

Islamic Income 954 978 1,037 1,009 1,165

Non-Interest Income 1,728 1,511 1,430 1,621 1,944

Operating Income 5,615 5,392 5,346 5,458 6,068

Operating Expenses (2,776) (2,620) (2,624) (2,700) (2,633)

Pre-Provision Profit 2,839 2,772 2,722 2,758 3,434

Provisions (522) (878) (1,181) (331) (625)

Associates 59.0 38.2 43.0 29.3 63.0

Exceptionals 0.0 0.0 0.0 0.0 0.0

Pretax Profit 2,376 1,931 1,584 2,456 2,873

Taxation (649) (480) (385) (593) (423)

Minority Interests (75.3) (24.2) (39.4) (67.9) (89.5)

Net Profit 1,652 1,427 1,160 1,796 2,361

Growth (%)

Net Interest Income Gth 1.2 (1.0) (0.8) (1.8) 4.6

Net Profit Gth (13.0) (13.6) (18.7) 54.8 31.5

Balance Sheet (RMm)

FY Dec 2015A 2016A 2017F 2018F 2019F

Cash/Bank Balance 55,647 58,141 32,521 38,721 46,121

Government Securities 7,692 2,492 1,745 1,396 1,117

Inter Bank Assets 13,618 13,445 13,848 14,263 14,691

Total Net Loans & Advs. 453,493 477,775 511,029 546,657 584,874

Investment 122,166 130,902 140,066 149,870 160,361

Associates 3,121 3,210 3,393 3,584 3,785

Fixed Assets 3,378 3,354 2,683 2,549 2,549

Goodwill 6,958 7,346 7,346 7,346 7,346

Other Assets 37,915 35,152 31,888 31,711 32,370

Total Assets 708,345 735,956 748,450 800,108 857,546

Customer Deposits 478,151 489,833 524,122 560,810 600,067

Inter Bank Deposits 39,014 30,855 24,684 22,215 19,994

Debts/Borrowings 56,945 56,968 58,491 60,060 61,675

Others 46,882 63,877 40,254 49,118 60,101

Minorities 1,818 1,959 2,205 2,472 2,773

Shareholders' Funds 61,695 68,516 74,268 80,517 87,521

Total Liab& S/H’s Funds 708,345 735,956 748,450 800,108 857,546


4Q16 earnings lifted by one-off disposal gains


Company Guide

Maybank

Financial Stability Measures (%)

FY Dec 2015A 2016A 2017F 2018F 2019F

Balance Sheet Structure

Loan-to-Deposit Ratio 94.8 97.5 97.5 97.5 97.5

Net Loans / Total Assets 64.0 64.9 68.3 68.3 68.2

Investment / Total Assets 17.2 17.8 18.7 18.7 18.7

Cust . Dep./Int. Bear. Liab. 83.3 84.8 86.3 87.2 88.0

Interbank Dep / Int. Bear. 6.8 5.3 4.1 3.5 2.9

Asset Quality

NPL / Total Gross Loans 1.9 2.3 2.1 2.0 2.0

NPL / Total Assets 1.2 1.5 1.5 1.4 1.4

Loan Loss Reserve Coverage 72.0 72.0 79.8 85.1 85.5

Provision Charge-Off Rate 0.4 0.6 0.5 0.4 0.4

Capital Strength

Total CAR 16.7 17.8 20.5 20.7 20.8

Tier-1 CAR 13.1 14.3 17.0 17.4 17.7


Target Price & Ratings History

Source: DBS Bank, AllianceDBS

Analyst: Sue Lin LIM

Lynette CHENG

S.No.Date of

Report

Closing

Price

12-mth

Target

Price

Rat ing

1: 03 May 16 8.78 8.90 HOLD

2: 30 May 16 8.23 8.80 HOLD

3: 02 Jun 16 8.27 8.80 HOLD

4: 04 Jul 16 8.23 8.80 HOLD

5: 12 Jul 16 8.20 8.60 HOLD

6: 14 Jul 16 8.02 8.60 HOLD

7: 01 Aug 16 8.03 8.60 HOLD

8: 26 Aug 16 8.00 7.50 HOLD

9: 05 Sep 16 7.89 7.50 HOLD

10: 31 Oct 16 7.90 7.50 HOLD

11: 25 Nov 16 7.80 7.50 HOLD

12: 07 Dec 16 7.89 7.50 HOLD

13: 13 Jan 17 8.32 7.50 HOLD

14: 20 Feb 17 8.42 7.50 HOLD

Note : Share price and Target price are adjusted for corporate actions. 15: 21 Feb 17 8.40 7.50 HOLD

16: 24 Feb 17 8.60 8.00 HOLD

17: 02 Mar 17 8.75 8.00 HOLD

18: 03 Mar 17 8.73 8.00 HOLD

19: 24 Mar 17 8.99 8.00 HOLD

20: 17 Apr 17 9.02 8.00 HOLD

1

2

3

4

5

6

7

8

9

10

11

1213

14

15

16

17

18

19 20

7.12

7.62

8.12

8.62

9.12

Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

RM

High capital ratios


Company Guide

Maybank

DBS Bank, AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:

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 i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

Completed Date: 20 Apr 2017 00:29:08 (MYT) Dissemination Date: 20 Apr 2017 08:26:51 (MYT)

Sources for all charts and tables are DBS Bank, AllianceDBS unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER

This report is prepared by DBS Bank Ltd, AllianceDBS Research Sdn Bhd (''AllianceDBS''). This report is solely intended for the clients of DBS Bank

Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or

duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd, AllianceDBS Research Sdn Bhd

(''AllianceDBS'').

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS

Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,

the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other

factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or

warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without

notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific

investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees

only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial

advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)

arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not

to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons

associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have

positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and

other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can

be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.

The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may

not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to

update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned

schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and

assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on

which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual

results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED

UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and

(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)

mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the

commodity referred to in this report.


Company Guide

Maybank

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public

offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage

in market-making.

ANALYST CERTIFICATION

The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the

companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her

compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)

primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the

issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real

estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the

management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or

his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has

procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of

research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment

banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment

banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the

DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary

position in the securities recommended in this report as of 31 Mar 2017.

2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research

Report.

Compensation for investment banking services:

3. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA, within the next 3 months, will receive or intend to seek

compensation for investment banking services from Maybank as of 31 Mar 2017.

4.

5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a

manager or co-manager or in any other investment banking transaction 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 document

should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced:

6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other

investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12

months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by

DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of

which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.


Company Guide

Maybank

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.


Company Guide

Maybank

United Kingdom

This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai

This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd

12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888

e-mail: [email protected] Company Regn. No. 196800306E

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