Maybank’s insurance, takaful and loans segments are expected to continue to drive the bank’s growth, going forward, analysts say. – Reuters photo
KUCHING: Malayan Banking Bhd’s (Maybank) insurance, takaful and loans segments are expected to continue to drive the bank’s growth, going forward, analysts say.
“We believe that the insurance and takaful segment will continue to be a meaningful contributor to the group. It will either boost during good times or moderate any headwinds to the group’s earnings,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research opined in a report.
It pointed out that Maybank’s Etiqa Insurance & Takaful is the leader in the general insurance and takaful segment as according to statistics by the Life Insurance Association of Malaysia (LIAM) and Insurance Services Malaysia Bhd (ISM), for the 12-month period until March 2018, it held an 11.5 per cent market share in this segment.
“One of the reasons for this is that Etiqa have been consistently growing faster than industry. For example, on a rolling 12-month period until the first quarter of the financial year 2018 (1QFY18) and 2QFY18, its regular premium/contribution for life & family business grew 38 per cent year-on-year (y-o-y) to RM446 million and 46.2 per cent y-o-y to RM475 million respectively compared with industry’s growth of 1.5 and 1.1 per cent y-o-y respectively.
“As for Etiqa’s general business, the net written premium/contribution for the 12-month rolling period up to 1QFY18 and 2QFY18 grew a consistent three per cent y-o-y respectively compared to the industry’s 0.9 and 0.6 per cent y-o-y respectively,” the research team said.
It also believed that Maybank has a strong agency force.
“It has more than 8,000 agents with 27 branches or sales service centres. This wide distribution network allows for better client coverage. Also, it is the no.1 online insurance and takaful operator in Malaysia,” it added.
“Going forward, Etiqa will be looking at growing its business in Asean. It will be leveraging on the high growth prospect and the Group’s strong base in the region.
“We believe that this makes good strategic sense. The preferred channel will be through Bancassurance, online and direct marketing. Amongst the completed efforts were the establishment of Etiqa Insurance Ptd Ltd, which is a dual licensed insurance company in Singapore, ventured into life and non-life insurance via controlling stake in of 68.3 per cent in AsianLife General Assurance in Philippines and acquired 75 per cent stake in PT Asuransi Asoka Mas for non-life insurance in Indonesia,” MIDF Research forecast.
Meanwhile, the research team at Kenanga Investment Bank Bhd (Kenanga Research) viewed that the key driver for Maybank’s loans growth will be from consumer lending.
“The economy is expected to be stable with risks of unemployment low thus Maybank will continue to have a higher risk appetite from households.
“With overnight policy rate (OPR) expected to be stable throughout 2019 coupled with stable employment, risk of deteriorating asset quality is benign, supporting the appetite for higher exposure in households,” it opined.
It also noted that the group’s Community Financial Services (CFS), which contributed more than 55 per cent of total loans (and covers consumers, retail SME and Business Banking) are expected to stay resilient.
It said, the asset quality from residential properties is still benign (1H18 gross income loan from residential property purchase at 0.18 per cent compared with the group’s GIL of 2.6 per cent).
“We understand that at present the group has no issue with unsold properties with financing mostly tied to Tier-1 property developers.
“Property loans are mostly to the mass market (with ticket size around RM360,000 to RM500,000) and 90 per cent are owner-occupied.
“We understand also that approval rates for residential property are at 70 to 75 per cent (above the industry rate of circa 70 per cent) reinforcing our belief of the group having a higher appetite for mortgages which will support its loans growth ahead especially with challenging corporate loans,” it added.
Overall, Kenanga Research maintained its ‘outperform’ call on the stock while MIDF Research reiterated its ‘buy’ call on Maybank.