HLIB Research raised its financial years 2024 (FY24) to FY26 profit estimates by 3%.
PETALING JAYA: Malayan Banking Bhd
(Maybank)’s earnings in the third quarter ended Sept 30 (3Q24) came within analysts’ expectations on the back of better total income and lower loan loss allowances.
Gross impaired loan ratio, which indicates loans might be non-performing, also ticked down.
However, Hong Leong Investment Bank (HLIB) Research said sequential net interest margin (NIM) saw a slippage, while loan growth tapered.
In 3Q24, the country’s largest bank by assets posted a net profit of RM2.5bil, bringing the nine-month (9M24) sum to RM7.6bil.
The deviation came from stronger-than-expected non-interest income (NOII), said the research firm.
Following this, HLIB Research raised its financial years 2024 (FY24) to FY26 profit estimates by 3%.
“We expect NIM to continue to compress in 4Q24, seeing that fixed deposit competition typically heats up in the October to December period.
“However, this will be cushioned by its move to employ a more disciplined loans growth strategy and also not be overly aggressive in chasing deposits.”
Hence, HLIB Research expects further slowdown in loan growth as a result of this tactical approach to preserve NIM.
That said, better foreign exchange translation (from weaker ringgit) would help to lift its headline performance.
“Separately, net credit cost is anticipated to remain below 30 basis points (as guided) given good asset quality management and Maybank has RM1.7bil of provision overlay balance that serves a profit lever in times of need.
“Loan loss coverage is now at 121% versus pre-pandemic level of about 73%,” said the research house in a report yesterday.
It retained its “hold” call on the stock as “current valuations still appear to be fair and its risk-reward profile remains balanced.
It sees no fresh major positive catalysts to spur share price much higher.
It has however upped the stock’s target price to RM11.10 (from RM10.80), based on 1.33 times FY25 price-to-book value with the assumptions of 10.5% return on equity (ROE).
On the other hand, Phillip Capital Research has upgraded the stock to “buy” following the recent pullback in share price.
The brokerage kept its Gordon Growth Model-derived target price of RM11.40 on the stock, implying a 1.37 times 2025 price-to-book value.
It believes this is justified by improved ROE, asset quality and an attractive 2025 dividend yield of 6%.
Key risks to its rating include continued NIM compression, rising cost base, deteriorating asset quality and intense deposit competition driving up funding costs.
“We anticipate a potentially weaker 4Q24 sequentially due to seasonal deposit competition, which could further compress NIM and lower NOII due to reduced market volatility.”
Phillip Capital noted that the banking group’s management reiterated its 2024 targets, including a 7.5% loan growth and an ROE of 11%.
