RHB Research: Maybank’s ROE still sub-par

RHB Research: Maybank’s ROE still sub-par

Tags: BII | Brokers Call | MCB Bank | Myabank | RHB Research

Written by Financial Daily
Wednesday, 07 October 2009 10:20

RHB Research noted that post MALAYAN BANKING BHD []’s (Maybank) FY09 results, the uncertainties surrounding the impairment on Bank Internasional Indonesia (BII) and MCB Bank of Pakistan would be eliminated.

“However, the aftermath (interest expense from hybrid and sub debt raised as well as dilution from the rights issue) from the expensive acquisitions means that its return on equity (ROE) will be sub-par over the next two to three years,” it said.

“Although BII’s prospects are promising (given a high-margin, low-penetration rate market environment in Indonesia), the group as a whole would need to integrate and ensure strong risk management and processes before embarking to realise the potential of BII. This would take two to three years before it returns to pre-acquisition ROE of 15% to 16%,” it added.

RHB Research maintained its underperform call on Maybank, pegging the stock’s fair value at RM5.97.

It added that earnings growth for the largest bank in the country seem to be intact.

“This is on the back of strong growth during the first two months of FY06/2010 (as transformation is slowly bearing fruits), high single-digit loan growth for the group (with the star being BII) and no kitchen sinking at BII (as full integration of provisioning policy has limited impact on P&L) to derail the expansion trajectory,” it noted.

RHB Research also said that BII is the focus for the future growth of Maybank.

“This is to capitalise on an underserved market with high margin. Besides transformation and expansion in BII, WOM Finance (providing motorcycle financing) will be another focal point. However, due to the latter’s track record, we are cautious about management’s optimism.”

RHB Research maintained its conservative projection of Maybank’s ROE for FY2010 to be at 10.2%, adding that it assumed the bank’s dividend payout to be 60% for FY2010 to FY2012.

Maybank gained six sen to close at RM6.71 yesterday.


This article appeared in The Edge Financial Daily, October 7, 2009.