KUCHING: Malayan Banking Bhd’s (Maybank) year on year (y-o-y) earnings growth is expected by analysts to rebound in financial year 2017 (FY17).
In a company guide, AllianceDBS Research Sdn Bhd (AllianceDBS Research) said backed by a strong deposit franchise, Maybank is in a better position than its peers to manage funding cost pressure.
AllianceDBS Research noted that Maybank’s current account, savings account (CASA) ratio of more than 35 per cent is the highest in the industry.
It further noted that management has guided for five to 10 basis points (bps) slippage in FY17.
Meanwhile, AllianceDBS Research highlighted that capital market-related activities have started to pick-up since early 2017, which bodes well for MAYbank’s non-interest income.
“Separately, the share of non-interest income at Maybank, which is largely driven by transactional fees from core banking services, should remain stable.
“Maybank’s solid deposit franchise and high CASA share give it a natural advantage over peers to strengthen its transaction banking segment.
“Growing fee-based income remains a strategic priority for Maybank,” the research house said.
With better containment in net interest margin (NIM) slippage, improvement in loan growth traction and lower credit cost, AllianceDBS Research thus expected y-o-y earnings growth to rebound in FY17.
Maybank’s Dividend Reinvestment Plan (DRP) has diluted return on equity (ROE), but the research house expected it to be managed by tweaking the electable cash and share portion.
For Maybank’s regional operations, AllianceDBS Research projected that outlook remains uncertain.
The research house noted that Maybank Singapore historically contributes circa 16 per cent to group pretax and Maybank is the only Malaysian bank with a Qualified Full Banking (QFB) licence in Singapore.
“Over in Indonesia, Maybank is represented by PT Bank Maybank Indonesia Tbk, formerly known as Bank Internasional Indonesia. Maybank Indonesia which used to contribute circa eight per cent to group pretax has seen its operations stabilising.
“However, the outlook for Indonesia banks remains uncertain as the momentum has yet to pick up,” AllianceDBS Research said.
The research house’s concern lies with Maybank’s Singapore operations which have loans extended to the oil and gas sector, which continues to be under pressure.
Despite Maybank having presence in 18 other countries, AllianceDBS Research projected that individual contributions will remain small in the near future.
“Maybank has also started work to get a toehold in Myanmar following the Central Bank of Myanmar’s decision to grant a foreign banking licence in 2014.
“Overseas operations (ex-Singapore and Indonesia) contributed circa four per cent to group pretax in FY16,” it said.