Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Company Name: MALAYAN BANKING BHD
| Research House: AMMB | Price Call: BUY | Target Price: 9.80 |
We are maintaining our BUY rating on Malayan Banking Bhd(Maybank), with unchanged fair value of RM9.80/share. This is based on an ROEfor FY12F of 14.7%, which translates into a fair P/BV of 2.1x.
Maybank held an Investor Day Briefing for its CommunityFinancial Services (CFS) division yesterday. The CFS division is the new housefor essentially the retail and SME segment which services the Group's Consumer,SME and commercial/business banking clients.
The transformation process which was started four years agoin 2008, led the CFS to move to a more customer-centric driven model. Underthis new model, the business banking and small-medium enterprise (SME) segmentswere now included in the CFS division from 2010. In 2011. The customer modelsin both segments were redefined to enhance the quality and relevance of itsproducts and service delivery.
Its main accomplishments to-date: (a) With the branches nowrequired to service the business segments as well, Maybank has seen a surge ingrowth of its business banking deposits by 70% in the last 18 months; (2) significantincrease in affluent customer base, by 14.6%. In addition, total financialassets related to this segment has expanded by a robust 24.2%, over the last 18months; (3) reduction in gross impaired loans ratio in this segment to 3.5%from 4.8%, over the last 18 months. This was attributed to proactive earlyrecovery efforts and restructurings, under its newly rolled out NationwideEarly Care Centre.
It expects 2012 to be tougher but is still generally positive.Growth in the business banking and SME divisions is expected to be drivenpartly by government's Economic Transformation Programme (ETP). For the retailsegment, Maybank remains positive on the mass affluent market and sees goodprospects for the auto, mortgage and credit card segments. Whilst overall loansapprovals and applications had seen moderation similar to the industry's inJanuary 2012, the February 2012's trend is now back to normal.
We remain positive on Maybank following this briefing. Webelieve the new house for its retail and SME segments is now on a much strongerfooting following the transformation process three years ago. We expect Maybank'skey rerating catalysts from here to be:- (a) improvement in asset quality,which will provide comfort that an up-cycle in loan loss provisioning willlikely be short-lived; (b) better-than-expected ROE; (c) betterthan-expecteddividend.
Source: AmeSecurities
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