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Maybank Q2 results below expectations

Friday, 26 August 2016

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KUALA LUMPUR: CIMB Research said Malayan Banking Bhd’s (Maybank) first half net profit was below expectations at 38% of its full-year forecast and 41% of Bloomberg consensus due to a spike up in loan loss provisioning (LLP).

“Maybank’s 1H16 net profit was below expectations at 38% of our full-year forecast and 41% of consensus due to chunky provisioning for rescheduled and restructured (R&R) loans.

“The 20 sen interim dividend per share was also below our expectation,” CIMB said in a report.

For the cumulative six months, Maybank’s net profit fell 21.3% to RM2.59bil from RM3.29bil in the first half of 2015. Consequently, its EPS fell to 26.41 sen from 35.02 sen.

The group’s revenue in the first half of 2016 increased 22% to RM22.12bil from RM18.12bil previously.

CIMB said Maybank’s 1H16 net profit dwindled by 26.8% year-on-year, dented by the 236% year-on-year surge in LLP that mainly emanated from R&R loans and a RM200mil (US$50mil) impairment  for  its  exposure  to  Swiber  bonds.

“On a positive note, pre-provisioning operating profit rose by a strong 10.6% year-on-year in 1H16 on the back of the healthy 8.7% year-on-year expansion in 1H16 operating revenue,” it added.

Although Maybank’s loans expanded by a strong 2.1% quarter-on-quarter in 2Q16, year-on-year growth eased from 5.7% year-on-year in March 2016 to 4.3% year-on-year in June 2016.

This was mainly due to the slowdown in Singapore loan  momentum  from  12.9%  year-on-year in  March 2016  to  6.7%  year-on-year in  June 2016. Loan growth in Malaysia picked up slightly from 3.7% year-on-year in March 2016 to 4% year-on-year in June 2016 but this  was below  the  industry pace  of  5.6%.  

The  Indonesia  unit  was  the  star  performer, with loan growth of 16% year-on-year in June 2016.

Gross impaired loan (GIL) ratio increased from  2.11%  in  March 2016  to  2.34%  in  June 2016, while loan loss coverage was largely stable at 70.5% in June 2016.

CIMB views any decline in Maybank share price following the weak 1H16 results as buying opportunities.

It said Maybank remained an “add”, premised on the recovery in earnings contribution from Indonesia, benefits of the ongoing regionalisation of its operations, and regional expansion of  its  insurance  and  Islamic banking  businesses.

CIMB has trimmed its EPS forecasts on Maybank by 5.8% for FY16 and 0.6% for FY17-18, as it bump up projected FY16 LLP by 20%, and cut FY16 loan growth forecast by 1% pt to 8.5%.

“We increase our projected credit charge-off rate for FY16 from 45 basis points to 55 basis points, above the group’s target of 40-50 basis points. The above reduces our dividend discount model-based target price from RM10.10 to RM10.05,” it said.

“The disappointing 1H16 earnings was due to its proactive restructuring of certain possibly troubled loans. We see any decline in share price following the weak 1H16 results as buying opportunities. The downside risk to our target price is prolonged high LLP,” CIMB said.

Source by: The Star Online

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