Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: UOB
Malayan Banking Bhd
(May 10, RM8.70)
Maintain buy at RM8.65 with target price of RM10.30: We expect Malayan Banking (Maybank) to report 3QFY11 net profit of RM1.15 billion to RM1.2 billion (2QFY11: RM1.13 billion; 3QFY10: RM1.03 billion), driven by its Indonesian subsidiary Bank Internasional Indonesia (BII) and fee income from investment and corporate banking.
We forecast another low single-digit quarter-on-quarter (q-o-q) and year-on-year (y-o-y) growth for net interest income (NII) in 3QFY11 on the back of a slower loan growth of 2% to 3% q-o-q (2QFY11: 5.7% q-o-q) due to the shorter number of working days. BII reported a loan growth of 40% y-o-y and 5.4% q-o-q in 1Q11 (FY ending: Dec 31).
NII growth is likely to be lower q-o-q due to rate competition, but should trend upwards in the subsequent two quarters following the recent 25 basis points (bps) hike in the overnight policy rate by Bank Negara Malaysia.
The buoyant and active domestic capital and debt markets will continue to drive its investment banking (IB) fees. Brokerage fees are expected to rise as total trading value in 3QFY11 jumped 6.3% q-o-q and 45.8% y-o-y. Total transacted value through Maybank Investment Bank rose 30% y-o-y in 3QFY11 (RM15.2 billion or 5.8% market share). A large portion of its non-interest income comes from its daily transactional fees and payment facilities from its largest Internet banking base.
After the 1QFY11 adjustment to the FRS 139 accounting standards resulting in higher provision, quarterly provisioning will trend down based on its current asset quality. This is due to the lower recognition of credit charge-off rate (about 40bps) under the FRS 139 accounting standard, versus 50bps to 60bps under the General Provision (GP) 3 method.
We make no change to our earnings forecasts and maintain 'buy' with a target price of RM10.30, pegged at 2.2 times FY12F price-to-book value (one standard deviation'' from its 10-year mean) or 15.4 times FY12F price-earnings ratio. Maybank has the largest national branch network, which gives it wide exposure to a revival in loan growth in the economy and makes it well-positioned to capture the rising domestic investment cycle.
Share price catalysts include better than expected loan growth domestically and overseas. ' UOB KayHian, May 10
This article appeared in The Edge Financial Daily, May 11, 2011.
Company Name: MALAYAN BANKING BHD
Research House: UOB
Malayan Banking Bhd
(May 10, RM8.70)
Maintain buy at RM8.65 with target price of RM10.30: We expect Malayan Banking (Maybank) to report 3QFY11 net profit of RM1.15 billion to RM1.2 billion (2QFY11: RM1.13 billion; 3QFY10: RM1.03 billion), driven by its Indonesian subsidiary Bank Internasional Indonesia (BII) and fee income from investment and corporate banking.
We forecast another low single-digit quarter-on-quarter (q-o-q) and year-on-year (y-o-y) growth for net interest income (NII) in 3QFY11 on the back of a slower loan growth of 2% to 3% q-o-q (2QFY11: 5.7% q-o-q) due to the shorter number of working days. BII reported a loan growth of 40% y-o-y and 5.4% q-o-q in 1Q11 (FY ending: Dec 31).
NII growth is likely to be lower q-o-q due to rate competition, but should trend upwards in the subsequent two quarters following the recent 25 basis points (bps) hike in the overnight policy rate by Bank Negara Malaysia.
The buoyant and active domestic capital and debt markets will continue to drive its investment banking (IB) fees. Brokerage fees are expected to rise as total trading value in 3QFY11 jumped 6.3% q-o-q and 45.8% y-o-y. Total transacted value through Maybank Investment Bank rose 30% y-o-y in 3QFY11 (RM15.2 billion or 5.8% market share). A large portion of its non-interest income comes from its daily transactional fees and payment facilities from its largest Internet banking base.
After the 1QFY11 adjustment to the FRS 139 accounting standards resulting in higher provision, quarterly provisioning will trend down based on its current asset quality. This is due to the lower recognition of credit charge-off rate (about 40bps) under the FRS 139 accounting standard, versus 50bps to 60bps under the General Provision (GP) 3 method.
We make no change to our earnings forecasts and maintain 'buy' with a target price of RM10.30, pegged at 2.2 times FY12F price-to-book value (one standard deviation'' from its 10-year mean) or 15.4 times FY12F price-earnings ratio. Maybank has the largest national branch network, which gives it wide exposure to a revival in loan growth in the economy and makes it well-positioned to capture the rising domestic investment cycle.
Share price catalysts include better than expected loan growth domestically and overseas. ' UOB KayHian, May 10
This article appeared in The Edge Financial Daily, May 11, 2011.
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