MAYBANK: Robust Performance Driven by Strategic Cost Management
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM11.40 (+14.7%) |
| Last Traded | RM9.94 |
| Recommendation |
A leading investment bank has highlighted strong financial performance for a key player in the finance sector, with net profit for the first nine months of fiscal year 2025 (9M25) rising 3.7% year-on-year (YoY). The results were largely in line with expectations, supported by a 3.2% YoY increase in net operating income and a slight decline in net impairment losses. The annualised Return on Equity (ROE) improved to 11.5%, surpassing management’s full-year target of over 11.3% for FY25.
Performance Review
The positive performance was underpinned by a 1.6% YoY improvement in net fund-based income, driven by robust loan expansion and proactive balance sheet management, including deposit cost optimisation. Despite a July OPR cut, the net interest margin (NIM) held steady YoY at 2.02% in 3Q25, even expanding by 2 basis points quarter-on-quarter. Loan growth was primarily fuelled by domestic operations, which saw a 6.0% YoY increase, particularly in mortgages, credit cards, and auto loans. However, loans from international operations experienced a 2.9% contraction, despite stronger Singapore loan growth offsetting declines in Indonesia and other markets.
Non-interest income saw a significant 6.3% YoY increase, benefiting from higher wealth fees and improved investment and trading income. Core non-interest income expanded 1.8%, with wealth fees up 23.6% and global markets income contributing positively. On the expense front, total overheads increased by 3.8% YoY due to higher personnel, marketing, establishment, and administrative costs. Despite these increases, the group’s cost-to-income (CTI) ratio remained stable at 48.9%. Net impairment losses decreased by 1.5% YoY, aided by provision reclassifications and non-retail recoveries. However, the gross impaired loan (GIL) ratio saw a slight uptick to 1.32% due to a new impairment from a Malaysian corporate borrower.
Future Outlook
Looking ahead, the group remains firmly on track to achieve its FY25 targets, including an ROE above 13% and a CTI ratio below 49%. Management anticipates domestic corporate loan momentum to accelerate in 4Q and into 2026, though competitive pressures may necessitate continued pricing discipline. Sentiment regarding asset quality and NIM has improved, with credit charge-off (NCC) guidance tightened to below 20 basis points from previous guidance of below 30 basis points. The management expresses comfort with its 110% loan loss coverage, supported by significant management overlays, and foresees potential for further NIM upside through liability repricing and active balance sheet management. However, year-end deposit competition could temper additional expansion.
Investment Recommendation
TA SECURITIES maintains its “BUY” recommendation for the stock, reiterating a target price of RM11.40, which suggests a 14.7% upside from its last traded price of RM9.94. The valuation is based on an implied price-to-book value of approximately 1.31 times, derived from the Gordon Growth Model.
