Maybank

Maybank, formally known as Malayan Banking Berhad, is Malaysia's largest financial services group with a strong regional presence across ASEAN . As one of the nation's systemically important banks, its business is anchored in a diversified model spanning conventional and Islamic banking, investment banking, insurance, and wealth management .

Financially, Maybank presents a profile of resilient profitability and a clear strategic focus on improving returns. Its Return on Equity (ROE) of 11.5% has recently exceeded its own guidance and is part of a strategic push to reach 13-14% by 2030, signaling a commitment to enhanced capital efficiency . This is supported by a healthy Net Interest Margin (NIM) managed around 2.05-2.10%, reflecting prudent asset-liability management despite a competitive landscape . The bank's asset quality remains a key strength, with a gross impaired loan ratio of just 1.3% and a manageable credit cost ratio, underscoring disciplined risk management .

From a valuation standpoint, Maybank appears reasonably priced relative to its fundamentals. The stock trades at a Price-to-Earnings (P/E) ratio of 12.32x and a Price-to-Book (P/B) ratio of 1.42x . While the P/B is above the sector median, it is within its historical 5-year range, suggesting fair value for a market leader . A significant draw for investors is its generous dividend yield of approximately 6%, backed by a payout ratio of around 73%—well above its minimum 40% policy—and a history of consistent payouts . Although its revenue has seen a slight TTM decline, its net profit and operational efficiency remain robust , positioning it as a stable, income-generating core holding with a clear roadmap for future value creation under its ROAR 30 strategic plan . (Click link below).

https://www.thestar.com.my/business/business-news/2026/01/22/maybanks-sustained-returns-growth-ambition#1

Hong Leong Bank

 

---

Summary of Financial Performance (2016–2025)

Over the past decade, Hong Leong Bank has demonstrated consistent and resilient earnings growth, with net income rising from MYR 1.9 billion in 2016 to MYR 4.27 billion in 2025—a cumulative increase of ~124%. This growth has been driven by a steady expansion in operating revenue, disciplined cost management, and a significant contribution from associates and joint ventures. The bank has also become progressively more generous with shareholder returns, as seen in the sharp increase in dividends per share from 41 sen in 2016 to 96 sen in 2025.

---

Key Observations and Discussion

1. Steady Revenue Growth with a Pause in 2019–2020
Operating revenue grew consistently from MYR 4.18 billion in 2016 to a peak of MYR 6.40 billion in 2025. The only period of stagnation was between 2019 and 2020 (MYR 4.78 billion both years), which coincides with the global pandemic and a low-interest-rate environment that compressed net interest income. However, the bank recovered quickly, with revenue accelerating from 2021 onward.

2. Net Interest Income Volatility Reflects Rate Cycles
Net interest income (NII) grew from MYR 2.66 billion in 2016 to MYR 3.99 billion in 2025. Interestingly, NII dipped in 2019 (MYR 2.76 billion) and 2020 (MYR 2.86 billion) due to lower interest income and higher interest expense, but then surged in 2023–2025 as interest rates normalized. The bank’s ability to grow NII despite fluctuating rate environments speaks to its effective asset-liability management.

3. Loan Loss Provisions – A Cyclical, Prudent Approach
Provisions have varied significantly year-to-year, reflecting the bank’s responsiveness to economic conditions:

• 2020 saw a spike in provisions (MYR -654 million) as the bank braced for pandemic-related defaults.

• 2023–2024 reversed the trend, with provisions turning positive (i.e., write-backs), indicating better-than-expected asset quality.

• 2025 provisions increased again (MYR 383 million), suggesting a more cautious outlook, possibly in response to macroeconomic uncertainties.

This cyclical pattern shows that management is proactive in building buffers during good times and releasing them when risks subside—a hallmark of prudent risk management.

4. Non-Interest Income and Associates Are Major Growth Engines
Income from non-interest operations (fees, trading, forex, etc.) grew from negative territory in 2016 (-MYR 221 million) to nearly MYR 1 billion in 2025, indicating successful diversification beyond traditional lending. Even more impressive is the income from associates and joint ventures, which rose from MYR 333 million in 2016 to MYR 1.47 billion in 2025—now accounting for ~27% of pre-tax profit. This suggests that the bank’s strategic investments in other financial entities (e.g., its stake in Bank of Chengdu) are paying off handsomely.

5. Profitability Has Risen Steadily
Pre-tax profit more than doubled from MYR 2.38 billion in 2016 to MYR 5.36 billion in 2025, despite higher taxes in recent years (MYR 1.09 billion in 2025 vs. MYR 478 million in 2016). Net income growth has been slightly tempered by tax increases, but the bank has still delivered a compound annual growth rate (CAGR) of ~9.4% in net income over the decade—a very solid performance for a large, established bank.

6. Shareholder Returns Have Improved Dramatically

• Earnings per share (EPS) grew from 87.81 sen in 2016 to 197.14 sen in 2025, more than doubling over ten years.

• Dividends per share (DPS) rose even faster—from 41 sen to 96 sen—reflecting management’s confidence in sustained earnings and strong cash generation.

• The dividend payout ratio has fluctuated between ~21% and ~49%, with a notable jump to 49% in 2024–2025. This suggests the bank is now returning a larger share of profits to shareholders, possibly because it has reached a scale where retained earnings for growth are less critical.

Public Bank Berhad

Public Bank Berhad demonstrates a business profile characterized by exceptional operational efficiency and prudent risk management, though it faces modest pressure on its core lending profitability.

Public Bank's financial ratios paint a picture of a well-managed institution with significant competitive advantages. Its cost-to-income ratio consistently remains in the low-to-mid 30% range, reported at 34.9% in Q3 2025 and 35.3% in Q2 2025 . This is substantially lower than the banking industry's average of 44.8%, indicating that the bank operates with superior efficiency, converting a larger portion of its revenue into profit compared to its peers .

The bank's asset quality is a standout feature of its business performance. With a gross impaired loan ratio of approximately 0.54%, Public Bank maintains one of the healthiest loan books in the Malaysian banking sector, far below the industry's NPL ratio of 1.4% . This conservative lending approach is further reinforced by a loan loss coverage ratio that significantly exceeds industry averages—reported at 159.9% compared to the 91.2% industry average . Including regulatory reserves, this coverage reaches an even higher 202.2%, demonstrating the bank's substantial provisioning buffers to absorb potential credit losses .

However, the net interest margin (NIM), a key measure of lending profitability, has experienced modest compression. It narrowed to 2.15% in FY2025 from 2.21% in FY2024, largely due to intense competition for deposits and rising funding costs . Management has guided for further contraction, with expectations of NIM stabilizing in the 2.08–2.10% range . While this pressure is a sector-wide phenomenon, Public Bank's efficient cost structure and robust non-interest income growth have helped offset the impact on overall earnings.

Public Bank's capital strength provides a significant strategic advantage. The group's Common Equity Tier 1 (CET1) ratio stood at approximately 14.3% in Q3 2024 and 13.8% at end-September 2025, well above regulatory minimums . This excess capital, estimated at RM3.4 billion or 18 sen per share, offers management considerable flexibility for potential dividend increases, strategic acquisitions, or organic loan growth without compromising capital adequacy . Additionally, upcoming Basel III reforms are expected to further enhance the CET1 ratio by up to 1.2 percentage points, strengthening the bank's capital position even more .

In summary, Public Bank Berhad continues to demonstrate resilient business performance grounded in operational excellence, superior asset quality, and robust capitalisation. While net interest margin compression presents a headwind common to the banking sector, the bank's industry-leading efficiency ratios, substantial provisioning buffers, and strong capital position provide a solid foundation for sustainable growth and shareholder returns.

How to analyse a bank's financial statements

To analyze a bank's financial statements properly, you have to completely change your mindset.

For a normal company (like a carmaker or a retailer), you analyze sales, margins, and inventory. For a bank, loans are its "inventory," deposits are its "raw materials," and risk is its primary expense.

Here is a comprehensive, step-by-step guideline for reading and analyzing a bank's financial statements, broken down into the three core reports and key ratios.

---

Part 1: The Income Statement (The "Profit Engine")

Ignore the top line. Focus on the bank's specific layers.

Step 1: Analyze Net Interest Income (NII)
Formula: Interest Income - Interest Expense = NII
This is the bank's core profit from borrowing short-term (deposits) and lending long-term (loans).

• What to look for: Steady, growing NII is good.

• The catch: NII can grow purely because interest rates rose, not because the bank is lending more. To filter this out, you must look at the Net Interest Margin (NIM) (see ratio section below). If NII grows but NIM shrinks, it means the bank is growing by taking on more loans but making less profit on each one—a red flag.

Step 2: Analyze Provisions for Loan Losses (Credit Costs)
This is the most critical line for a bank. It is money set aside for loans that are likely to go bad.

• What to look for: Compare provisions to the previous year and to Net Interest Income.

• The rule: If NII grows by 10%, but provisions grow by 30%, the bank is getting riskier. A sudden spike in provisions (like Public Bank's 2020 figure) usually precedes an economic downturn.

• The catch: If provisions are too low for too long, management might be overly optimistic and under-reserving for future defaults. Healthy banks have provisions that rise and fall predictably with the economic cycle.

Step 3: Analyze Non-Interest Income (Fee Income)
This includes service charges, wealth management fees, credit card fees, and trading revenue.

• What to look for: A growing percentage of non-interest income is excellent because it is less dependent on interest rate fluctuations. However, be wary of trading income—it is highly volatile and risky compared to steady service fees.

Step 4: The Bottom Line (Net Income)
Banks usually have very stable net income margins (around 20-35%). If you see a massive jump in net income, make sure it came from NII growth or fee income, not from a one-time tax benefit or sale of assets.

---

Part 2: The Balance Sheet (The "Risk Warehouse")

This is where the bank stores its assets (loans) and liabilities (deposits). The quality of these items matters more than their size.

1. The Asset Side (What the bank owns)

• Cash & Securities: High-quality government bonds are safe but yield low returns. Riskier corporate bonds yield more but carry default risk.

• Gross Loans (The biggest line): Look at the composition. Is the loan book dominated by residential mortgages (safe, stable) or commercial real estate/unsecured personal loans (riskier, higher yield)?

• The Critical Line – Allowance for Loan Losses (ALL): This sits right below Gross Loans on the balance sheet.

  • Gross Loans - Allowance for Loan Losses = Net Loans

  • This is the accumulated rainy-day fund for all bad loans. Compare this allowance to the bank's Non-Performing Loans (NPLs)—it should comfortably cover them.

2. The Liability Side (What the bank owes)

• Deposits: This is a bank's cheapest source of funding.

  • Current/Savings Accounts (CASA): These pay very low interest. A high percentage of CASA deposits is a massive competitive advantage because it lowers the bank's overall Interest Expense.

  • Fixed Deposits: These pay higher interest. If a bank relies too heavily on fixed deposits, its Interest Expense rises, squeezing NII.

3. Shareholders' Equity (Book Value)
This is the safety buffer for depositors. If loans go bad, equity absorbs the first losses. A bank with thin equity relative to its loans is highly leveraged and risky.

---

Part 3: The Cash Flow Statement (The "Liquidity Pulse")

For normal companies, cash flow from operations is king. For banks, cash flow from operations is massive and noisy because loans and deposits are constantly moving. Therefore, most analysts skip the operating cash flow section and focus on:

• Financing Activities: Are they issuing new shares or bonds to raise capital?

• Dividends: Banks are heavily regulated and usually pay consistent dividends. A sudden cut in the dividend payout ratio (as seen in Public Bank's 2025 data) is a major signal—it usually means regulators are forcing the bank to retain capital to meet stricter requirements.

---

Part 4: The 5 Most Critical Ratios for Bank Analysis

Throw away P/E ratios for a moment. These are the specific metrics used by banking analysts:

Ratio	Formula	What it Tells You	Healthy Sign
Net Interest Margin (NIM)	(Net Interest Income / Average Earning Assets)	The pure profitability of the bank's core lending business.	Stable or slowly expanding. A shrinking NIM means intense competition or a falling rate environment hurting profits.
Cost-to-Income Ratio	(Operating Expenses / Total Income)	Operational efficiency. How much does it cost to run the bank?	Below 50%. Lower is better. A rising ratio means the bank is spending too much on branches and staff.
Non-Performing Loan (NPL) Ratio	(Non-Performing Loans / Total Gross Loans)	Asset quality. The percentage of loans that are not being repaid.	Below 3%. A sudden jump means the economy is struggling and provisions will soon follow.
Loan Loss Coverage Ratio	(Allowance for Loan Losses / Non-Performing Loans)	How well the bank is protected. Can its saved-up provisions cover its actual bad loans?	Above 100%. If this drops below 100%, the bank doesn't have enough money set aside to cover current defaults.
Common Equity Tier 1 (CET1) Ratio	(Core Equity / Risk-Weighted Assets)	The bank's ultimate safety net. Mandated by regulators (Basel III).	Above 10%. A higher CET1 means the bank is super-safe but might be under-utilizing its capital to generate returns.

---

Part 5: A 5-Step Analysis Framework

When you pick up a bank's annual report, follow this exact order:

1. Start with the NPL Ratio: Is it rising or falling? If it's rising, the economy is weakening.

2. Check the Coverage Ratio: Does the bank have enough provisions saved up to cover those rising NPLs? If not, they will have to slash future profits to fill the gap.

3. Analyze the Funding Mix (CASA vs. Fixed Deposits): Is the bank using cheap current accounts to fund itself? A falling CASA ratio means the bank's funding costs are rising.

4. Look at the Efficiency (Cost-to-Income): Is management controlling costs effectively, or are they expanding branches too aggressively?

5. Cross-check the Dividend Payout: Is the payout ratio sustainable (usually 40-60%)? If they suddenly retain all their earnings (like Public Bank in 2025), it usually means regulators are demanding higher CET1 capital, which limits future growth.

---

Summary Checklist for a "Good" Bank

• Profitability: NIM is stable or growing; NII grows faster than Provisions.

• Asset Quality: NPL ratio is low and stable; Coverage ratio is well over 100%.

• Capital Safety: CET1 ratio is comfortably above regulatory minimums (e.g., >10%).

• Funding: Relies heavily on low-cost CASA deposits rather than expensive wholesale funding.

• Governance: Avoids complex, opaque trading assets and focuses on plain-vanilla lending.

Final Warning: Never look at a bank's "Net Income" in isolation. A bank can show record profits while simultaneously loading up on risky loans that will only default 2 years later. Always prioritize asset quality and capital adequacy over headline earnings growth.

How to use Enterprise Value/EBIDTA ratio?

The EV/EBITDA ratio is one of the most widely used valuation tools among professional investors. Unlike the P/E ratio, it is capital-structure neutral (ignores debt vs. equity) and ignores non-cash accounting charges (depreciation & amortisation). This makes it the go-to metric for comparing companies within the same industry, regardless of how they finance their operations.

Here is exactly how investors use this ratio to determine if a stock is expensive, fair, or cheap.

---

1. The "Rule of Thumb" Benchmarks

While there is no single "correct" number for the entire stock market, a generalised framework (used for mature, industrial, and manufacturing companies) is:

EV/EBITDA Multiple	Typical Interpretation
Below 6x	Cheap / Undervalued – Often signals a distressed sector, cyclical trough, or a company facing structural headwinds.
6x – 10x	Fair / Value territory – Common for mature, stable businesses with moderate growth.
10x – 15x	Expensive / Growth priced in – Usually reserved for companies with strong competitive advantages (moats) or above-average growth.
Above 15x	Very Expensive / Speculative – Seen in high-growth tech, biotech, or pandemic-era bubble stocks (e.g., glove stocks hit 30x–40x in 2021).

Warning: A low multiple (cheap) can be a "value trap" if earnings are about to crash. A high multiple (expensive) can be justified if earnings are set to explode.

---

2. The 4-Step Process Investors Actually Use

Investors never look at the EV/EBITDA number in isolation. Here is the step-by-step framework:

Step 1: Compare against Industry Peers (Sector Relative)
This is the most critical step. A 5.5x EV/EBITDA might be "expensive" for a utility company (which often trades at 4x-6x), but "extremely cheap" for a software company. For Kossan, investors would compare it directly to Top Glove, Hartalega, and Supermax. If their average is 12x and Kossan is at 5.5x, Kossan appears significantly undervalued relative to its peers.

Step 2: Compare against its own 5-Year Historical Average (Mean Reversion)
Investors check where the stock usually trades during a normal cycle.

• Pre-pandemic (2017–2019), Malaysian glove makers routinely traded at 8x–12x EV/EBITDA.

• During the pandemic boom, they hit 25x–40x.

• During the post-pandemic crash, they fell to 4x–6x.
  Since Kossan is currently at 5.5x, it is trading at the very bottom of its historical trough range. Value investors see this as cheap, provided the cycle is improving.

Step 3: Adjust for Growth Expectations (The "PEG" equivalent)
EV/EBITDA ignores future growth. Investors adjust the ratio by asking: "Is EBITDA growing or shrinking?"

• If EBITDA is growing at +20% per year, a 10x multiple is cheap.

• If EBITDA is shrinking at -10% per year, a 10x multiple is expensive.
  Kossan's EBITDA in 1H26 grew significantly (due to recovery). A 5.5x multiple on growing earnings is exceptionally attractive. If Kossan's EBITDA were to double over the next 2 years, the forward EV/EBITDA would drop to ~2.75x, which is deeply undervalued.

Step 4: Adjust for Capital Expenditure (The "Capex Trap")
This is the biggest flaw of EBITDA. It adds back Depreciation, but Depreciation represents the wear-and-tear of factories. If a company needs to spend massive amounts on new machinery just to maintain current earnings, the EBITDA is misleading.

• Kossan's 1H26 capex was RM 95.5 million, while Depreciation was RM 52 million. It is spending more than its depreciation. Investors will deduct this extra capex to get a clearer picture. If a company's maintenance capex is consistently higher than depreciation, a "cheap" 5.5x multiple suddenly becomes more expensive in real cash-flow terms.

---

3. Applying This Framework to Kossan (Current EV/EBITDA = 5.5x)

Verdict: Based on the data provided, professional investors would likely classify Kossan's current valuation as Cheap to Fair Value.

Criteria	Assessment for Kossan
General Rule of Thumb	Cheap (Well below the 6x-10x fair zone).
vs. Glove Peers	Cheap (Peers likely trade higher during a recovery phase).
vs. Historical Avg (8x-12x)	Cheap (Trading at the trough of the cycle).
Growth Adjustment (1H26)	Very Cheap (EBITDA is growing strongly; a 5.5x multiple on a recovery cycle is highly attractive).
Capex Adjustment	Moderately Cheap (The heavy capex means real cash profits are lower than EBITDA suggests, but the massive RM 957m cash pile offsets this risk).

---

4. The Ultimate Investor Takeaway

Investors use EV/EBITDA to quickly answer: "If I buy the whole company (debt + equity), how many years will it take for the pre-tax, pre-interest cash earnings to pay for the purchase price?"

• At 5.5x, it would take ~5.5 years for Kossan's EBITDA to pay for the enterprise value.

• At 8.0x (its historical average), it would take 8 years.

Because the glove industry is still in the early stages of recovery from a massive supply glut, a 5.5x multiple is pricing in pessimism—investors are worried that the current earnings recovery might stall.

If Kossan continues to deliver the strong operational improvements seen in 1H26, the market will likely re-rate the stock toward its historical 8x–10x EV/EBITDA range. At 8x, using Kossan's current annualised EBITDA, the implied Enterprise Value would be RM 2.83 billion (8 × RM 353.5m). Adding back its huge net cash (RM 918.5m), the implied market cap would be ~RM 3.75 billion, which is ~31% higher than today's RM 2.85 billion market cap.

In short: Based purely on this metric, Kossan looks fundamentally cheap, but investors are waiting for stronger confirmation that the industry oversupply is permanently resolved before paying a higher multiple.

Note:   Topglove, Hartalega and Kossan are glove companies.