Friday January 25, 2013

Maybank final dividend may exceed expectations

PETALING JAYA: Malayan Banking Bhd (Maybank), the largest financial institution in the country, is forecast to announce a higher-than-expected final dividend for the fourth quarter ended Dec 31, 2012, said Affin Investment Bank (Affin IB).

“Maybank has announced an interim dividend payout of 32 sen gross, of which 28 sen was under the dividend reinvestment programme.

“Based on management's guidance, Maybank is expected to fully utilise all its remaining Section 108 tax credit in financial year ended 2012 (FY12) instead of setting aside any reserves for payment in FY13.

“As such, we think that Maybank's final dividend could exceed our current forecast of 29 sen gross or 21.75 sen net for the fourth quarter.

“Thus, we have revised and front-loaded the FY12 gross dividend per share forecast from 61 sen to 69 sen (51.75 sen net and in-line with consensus), as our final dividend assumption has been raised to 37 sen from 29 sen,” it said in a report.

The bank has maintained an “add” call on the counter with a target price of RM8.87.

In the past three financial years, Maybank's payout ratio has been in the region of 75% to 81.5% and certainly higher than the guided dividend policy of between 40% and 60%.

On the upcoming fourth-quarter results slated to be released on Feb 21, Affin IB expects it to be steady, supported by Maybank's healthy loan growth in its core competencies.

“As at the third quarter of FY12, Maybank commanded an overall industry market share of 18.2% and continued to lead in securities financing loan ASB unit trust with a market share of 61.4%.

“Maybank ranks second in consumer loans with a 7.5% market share, credit cards at 15.8%, hire-purchase at 20.3% and mortgages at 13.3%,” it noted.

Affin IB said further net interest margin compression, albeit moderating, would be inevitable, arising from higher funding costs and expansion in deposit base, driven by small and medium entrepreneurs (SME) fixed-deposits and competitive loan pricings.

“Meanwhile, management aims to maintain an adequate level of liquidity, benchmarked against a net loan-to-deposit ratio of 90%, and will grow deposits in tandem with loans growth,” it stated.

Additionally, Affin said the deal pipeline from the equity and debt capital markets remained robust, although the timeline for capital-raising remained uncertain while investor risk appetite was still low on beta.

“Management continues to remain optimistic, given that under the enlarged entity of Maybank-Kim Eng, it is expected to continue winning regional mandates and making inroads into new markets,” it said.

To recap, the investment banking unit (under Maybank-Kim Eng) has been reorganised into five business pillars in 2012 investment bank and advisory, retail equities, institutional equities, equity and commodity solutions, and asset management.

Affin said based on a three-year roadmap to become a regional financial powerhouse by 2015, Maybank-Kim Eng planned to establish its home markets and capture more operational and cost synergies arising from the merger.

“Indonesia remains another high-growth market and the Maybank Group has not yet reaped the full earnings potential of this country to its profit contribution.

“The near-term objective is to increase PT Bank Internasional Indonesia's profit contribution from 7% to the low teens in FY13 and FY14,” it said.

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Friday January 25, 2013

Maybank final dividend may exceed expectations