Malayan Banking Beat Expectations… Again

Above consensus. Maybank’s 9M12 net profit of MYR4.29b came in at 80% of consensus full-year estimates, with the beat coming mainly from lower provisions and a lower tax rate. 9M12 pretax profit rose 15.6% YoY, with the divisional outperformers being corporate banking (+26%), investment banking (+163%) and international banking (+53%). Contributions from community financial services declined 9% (distorted
by adjustments to provisions and internal account transfers) while pretax profit from insurance/takaful/asset management fell 24% YoY.

3Q12 operating profit was down 5% QoQ to MYR2.09b, largely on account of lower income from Islamic banking. Also, 2Q income was bolstered in part by the recognition of 6 months of surplus transfer from
the life insurance's non-par fund of RM125m vs 3 months of RM72m in
3Q. Pretax profit (flat QoQ) was bolstered by lower credit costs while net profit rose 4% QoQ due to a lower tax rate of 24% (2Q12: 27%).

Positively, NIMs were stable QoQ while credit costs were much lower at just 12bps in 3Q vs. 27bps in 2Q. However the group missed its loan growth target; annualised loan growth for 9M12 came in at just 10% vs. a target of 16%. The larger miss was in Singapore where management has decided to scale back lending amid stiff competition, in a move towards protecting margins. While liquidity tightened (LDR of 90% from
87% at end-June), CASA composition improved to 35% of total deposits from 33% at end-June.

Increased regional contributions. International operations now account for 30% of group pretax profitvs. 22% in 9M11, with Singapore and Indonesia making up 15% and 7% respectively.

No word yet on local incorporation in Singapore. Management has yet to receive a response from the Monetary Authority of Singapore on local incorporation, which could see its physical branch network expand to 35 from 22 presently if permitted. This aside, management hopes to open another 131 branches overseas over the next three years, in Laos (from one branch presently to 5), Cambodia (11 to 20), Philippines (52 to 100) and Indonesia (380 to 450).

Likely to surpass its ROE target. With an ROE of 16.3% for 9M12, management looks set to surpass its FY12 ROE target of 15.6%.

Malayan Banking – Summary Earning Table (click to enlarge)

by MIB