PETALING JAYA: Malayan Banking Bhd’s (Maybank) Indonesian operations in its recent results saw a contraction in its net interest margin (NIM) on a sequential basis.
Still, it chalked up a four-fold, year-on-year (y-o-y) rise in its net profit which was in line with analyst expectations.
“Earnings increased four-fold, thanks to a positive Jaws, lower provision for bad loans and an effective tax rate,” Hong Leong Investment Bank’s (HLIB) research unit told clients in a report.
“We continue to like Maybank for its regional exposure and leadership position. Moreover, it offers superior dividend yields,” it said.
HLIB also said Maybank was least affected by the prosperity tax, which will kick in this year.
It has retained its “buy” call on the stock with a target price of RM9.40, based on a 1.22 times financial year 2022 (FY22) price-to-book ratio.
At last look, the Maybank stock was at RM8.78, valuing the whole banking group at RM104.29bil.
In its report, HLIB noted that Maybank’s Indonesian unit saw a lower impaired loans provision by 26% and effective tax rate in the quarter under review that were more than sufficient to offset the tepid total income showing.
“We expect NIM to hold steady at current levels since Bank Indonesia stayed pat on its monetary policy and will only look to review the key benchmark interest rate in the third quarter of FY22; hikes will be favourable to NIM in the medium term, but loan de-risking and re-profiling activities could cap a stronger NIM expansion,” the research house said.
As for loan growth, we see continuous recovery over the next six to nine months.
Separately, loan restructuring efforts will help to limit a significant sag in the non-performing loan (NPL) ratio. Otoritas Jasa Keuangan (a government agency that regulates and supervises the financial services sector) has prolonged the loan restructuring programme until March 2023 to support troubled borrowers, HLIB said.
PT Bank Maybank Indonesia said in a statement last Friday that it had taken conservative measures since 2020, to set aside provisions for accounts across all business segments impacted by the challenging economic environment.
It said the bank’s consolidated NPL ratio stood at 3.7% (gross) and 2.6% (net) in December 2021 from 4% (gross) and 2.5% (net) in December 2020, supported by lower NPL balances, which declined by 10.8%.
Meanwhile, the bank’s loan at risk ratio also improved and stood at 18% in December 2021 from 21.5% in the previous year.
The improved ratio was attributed to the improvement of loan quality, as the bank proactively took part in monitoring and restructuring customer loans, it said.