Business

Saturday November 14, 2009

Analysts revise upward projections for Maybank

By YEOW POOI LING


They expect the bank to post better profit on improved performance

PETALING JAYA: Analysts have revised upward their earnings expectations of Malayan Banking Bhd (Maybank) after the bank’s first-quarter performance beat street consensus.

HwangDBS Vickers Research said Indonesia was expected to play a crucial role in Maybank’s earnings for the year ending June 30, 2012 (FY12).

“We have imputed potential growth from Bank Internasional Indonesia (BII) with 15% contribution to earnings in FY12.

“BII’s recent quarterly results were a turning point, coupled with significant improvement from WOM Financing. BII is targeting to grow its loan book by 20% to 25%,” it added.

While the international operations are anticipated to improve with better economic outlook, the domestic market is expected to see improving capital market activities and lower provisions.

HwangDBS revised its earnings estimates by 11% to 12% for FY10 and FY11, after adjusting for higher non-interest income, better net interest margin (NIM) and lower provisions.

OSK Investment Bank, meanwhile, noted that the trading gains seen in the first quarter were unsustainable, partly driven by lumpy gain of almost RM80mil on sale of government securities, which was likely to normalise to RM20mil to RM30mil per quarter.

The first-quarter earnings were also boosted by a lumpy syndicated fee income from BII, which the management expected to normalise in the subsequent quarters, it said.

OSK revised earnings forecast for FY10 by 4.6%, accounting for the strong trading gains for first quarter and upward revision in loans growth estimates to 10% from 7.5% previously.

“We have also revised upward our FY11 earnings estimates by 5.2% to account for stronger loans growth from BII and lower overall group credit cost of 70 basis points (bps) versus original 75bps,” the brokerage added.

Kenanga Research, in a report, also noted that Maybank had a one-off marked-to-market gain of RM93mil on its US dollar exposure.

The group’s net interest income, meanwhile, expanded 4.1% in the first quarter versus the preceding quarter, with NIM rose to 2.8% (fourth quarter 2009: 2.7%).

“During the quarter, the management was able to reduce deposit rate faster than asset yield. A lower cost of fund by 10 bps to 1.7% had outpaced 7bps decrease in asset yield to 5.35%,” Kenanga said.

Despite guidance for FY10 credit charge-off of 75bps, loan loss was likely to peak within the next 12 months and the group’s provisioning to normalise by FY11 after realigning BII’s provisioning policy, it said.

The group’s domestic and Singapore operations should see credit charge normalise by early FY10, underpinned by the improvement in global economic conditions.

“We expect the group to achieve 11.8% return-on-equity by end of FY10, with Malaysia and Singapore being the major earning contributors,” said the research house.

Kenanga has raised Maybank’s earnings forecast by 28.9% for FY10 and 9.7% for FY11 on better-than-expected NIM expansion and Islamic income contribution.


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