Malayan Banking Berhad

Company description

Malayan Banking Berhad, commonly known as Maybank, is Southeast Asia’s fourth

largest bank by assets and the largest company in Malaysia based on market

capitalization. Maybank is also the fifth largest Islamic bank globally. The Bank is the

holding company and listed entity of the Maybank Group and has a global network

of over 2,400 offices in 20 countries, including all 10 ASEAN countries. The Bank's

home markets are Malaysia, Singapore and Indonesia, contributing 64.5%, 14.7%

and 11.1% of FY17 revenue respectively. The Bank also has a presence in

international financial centres (Hong Kong, London, New York etc.).

Investment thesis

Maybank is the domestic market leader in transactional banking with the largest branches and ATM network. Its regional exposure is mainly through Singapore and Indonesia (Bank Internasional Indonesia.) We view the bank as a proxy to Malaysia’s longer term economic growth and progress.

Investment summary

  • 1H results softer than expected as conditions remained challenging - 1H18 net profit of MYR3.83bn grew 14% yoy. 2Q18 net profit of MYR1.96bn gained 5% qoq despite the Hyflux provisioning, driven by non-interest income growth (+4% qoq). 2Q provisions increased 12% qoq, but were lower 33% from a year ago (higher base). 2Q NIM compressed 12bps on the back of increased group liquidity. Cost to income ratio was reduced 1.4% qoq to 46.2%. CET1 was ~13.2%.

  • Loans growth picked up from 1.5% (1Q) to 4.6% (2Q) - 1H18 loans grew 5% yoy (+2% qoq_, with all key markets (Malaysia +6%, Singapore +9%, Indonesia +7%) seeing uplift predominantly supported by CASA growth. Reported loan deposit ratio was 93%.

  • Better than expected loans growth momentum.

  • Meaningful improvement in asset quality trends.

  • Net interest margins expansion

  • Faster than expected non-interest income growth

  • Higher sustained dividend pay-out.

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