Broker’s Call: Maybank’s Q4 Revenue Expected to be Stronger, Maintain Add

Winson Ng

November 29, 2022

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CGS-CIMB Analyst take

Banking stocks have been performing relatively well this year amid rising interest rates and the positive impact these rate hikes have on their financial performance.

Malaysia’s largest bank, by market capitalisation and total assets, Malayan Banking Bhd (KLSE: 1155), just reported its Q3 FY2022 earnings last week.

While Malayan Banking Bhd, or simply known as Maybank, saw its net profit for the first nine months of FY2022 (“9M FY2022”) only account for 73% of our research team at CGS-CIMB Securities’ full-year forecast, the research team deemed it as within their expectation.

This is as we expect a stronger Q4 financial performance.

Our research team at CGS-CIMB Securities reiterates our “ADD” recommendation on Maybank and maintains our target price of RM10.30.

For investors, here are some of the key highlights from Maybank’s latest financial results.

Net profit rose 0.5% in 9MFY2022, commendable performance

While Maybank’s net profit was only up 0.5% year-on-year (yoy) in 9M FY2022, we regard it as a commendable performance considering the higher effective tax rate of 30.3% in 9M FY2022.

The higher tax rate was due to the Cukai Makmur taxation.

In terms of earnings drivers, this was due to the 15% increase in net interest income (NII) and 8.9% increase in non-interest income.

The higher NII was led by the expansion of its net interest margin (NIM) amid the rising OPR while non-interest income growth was due to improved investment income.

Strong earnings growth in Q3 despite higher tax rate

Maybank’s Q3 FY2022’s net profit jumped by 28.5% yoy, mainly due to the 14% increase in NII, 45.8% surge in non-interest income amid better investment income and 25.4% decline in loan loss provisioning.

On a quarter-on-quarter basis, Maybank’s net profit also maintained its momentum growth with an increase of 17.4%.

The jump was mainly driven by the increase in non-interest income and drop in loan loss provisioning.

Stronger revenue in Q4 to drive earnings growth

We project net profit to edge up by 1.2% quarter-on-quarter to RM2.19 billion in Q4 FY2022, amid higher revenue.

This would translate into earnings growth of 6.5%, supported by continuous expansion in NIM and recovery in non-interest income.

Reiterate our Add rating and maintain target price

For Maybank, we reiterate our “ADD” call, premised on the potential rerating from our expectation of strong loan growth in Indonesia of more than 10% in FY2022, continued expansion in NIM amid the OPR upcycle and recovery in non-interest income.

Investors will also love Maybank’s attractive dividend yield of 4.9% for FY2022.

As we maintain our FY2022-FY2024’s earnings per share forecast, we maintain our target price of RM10.30 based on a dividend discount model.

Disclaimer: CGS-CIMB Securities Malaysia Banks Analyst Winson Ng doesn’t own shares of any companies mentioned.

About the Author: Winson Ng