MAYBANK: Earnings Beat Expectations on Strong Fund Income and Efficiency Gains

A leading financial institution has reported robust fourth-quarter and full-year financial results, surpassing both internal and consensus estimates. The bank’s Profit After Tax and Minority Interest (PATAMI) for the fourth quarter of fiscal year 2025 (4QFY25) climbed 5.7% year-on-year to RM2.68 billion. This strong quarterly performance contributed to a full-year FY25 PATAMI of RM10.5 billion, aligning closely with analyst projections.

The stellar performance was primarily attributed to an increase in net fund-based income, driven by a 3 basis points expansion in Net Interest Margin (NIM) to 2.09%, alongside a significant reduction in impairment costs. Management noted that operational improvements were key drivers for Return on Equity (ROE) expansion, targeting 13-14% within the strategic planning period, rather than relying solely on higher payout ratios.

Operational Strengths and Asset Quality

Despite a challenging market, the institution successfully defended its FY25 NIM at 2.05% through proactive balance sheet management. It also demonstrated strong Current Account Savings Account (CASA) growth, with the group’s CASA ratio expanding by 4 percentage points to 40.5% for FY25. This robust growth was complemented by healthy liquidity metrics, with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) standing at 138.2% and 116.6%, respectively.

Non-interest income (NOII) saw a 2.7% year-on-year rise, bolstered by higher wealth fees, treasury income, and investment banking-related fees. The bank’s asset quality remained sound, evidenced by a 66.4% year-on-year decline in Expected Credit Loss, driven by the completion of a corporate borrower restructuring exercise and recoveries in the non-retail portfolio. The net credit charge-off rate improved to a mere 8 basis points, supported by substantial management overlays of RM2.3 billion, which provide a strong buffer against potential asset quality pressures.

Challenges and Future Outlook

While overall performance was strong, the bank’s FY25 loans growth of 1.7% fell short of its 3% guidance. This was primarily due to a decline in its Singaporean and Indonesian Global Banking portfolios, coupled with adverse foreign exchange impacts. Total deposits also experienced a 1.5% year-on-year fall, influenced by active liability management efforts, including a decline in fixed deposits in key regional markets.

Looking ahead, management has set a loan growth target of 4-5% for FY26. The institution also reiterated its commitment to maintaining a 70% dividend payout ratio. Wealth management is identified as a crucial driver for future NOII growth, aligning with the bank’s aspirations to be a leading regional wealth manager, capitalising on ASEAN’s growing prominence. While excess capital could potentially be returned via special dividends in the long run, this is not anticipated in the near term.

The investment bank noted that a robust balance sheet and consistent earnings growth justify its positive outlook.