KUCHING: The transformation of Malayan Banking Bhd’s (Maybank) risk management practices have been projected by analysts to be a positive contributor to the sustainability to the group’s earnings going forward.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the implementation of Malaysian Financial Reporting Standard (MFRS) 9 caused banks to rethink loss impairment and credit cost recognition, from actual to a forward looking basis.
“This had also changed the way the group views its risk management practices whereby it is more proactive rather than historical and passive. To achieve this, the group is continuing to transform its capabilities in terms of personnel,” MIDF Research said, after attending an Investor Day to highlight group’s Risk Management programme.
MIDF Research also highlighted that the group employs the use of technology to accomplish this proactive risk management.
“Big data are used in conjunction with artificial intelligence and machine learning to enhance its predictive capability. This allows the group to better assess the current and possible future operating environment to assist in its business decisions such as achieving an efficient capital allocation, balance sheet optimisation and control asset quality.”
The research arm believed that some of the benefits from this are the lower credit cost seen by the group thus far.
“We believe that the transformation of the group’s risk management practices will be a positive contributor to the sustainability to its earnings going forward. We were surprised at how extensive and the pace that the group have embraced data analytics, artificial intelligence and machine learning.
“Typically, we could observe this in a smaller organisation. Furthermore, more improvements are being made.”
MIDF Research opined that this will ensure the group resiliency to face economic shocks.
It noted that this is evident by the group’s ability to post decent operational result despite a challenging environment in the first quarter of financial year 2019 (1QFY19).
“Meanwhile, in the short term, we expect the weakness in income seen in last quarter will likely moderate.”
Hence, MIDF Research maintained its ‘buy’ call on Maybank with unchanged target price of RM11 per share.
“Also, we should note that its dividend yield of circa over six per cent should provide a buffer for investors from any downside risk.”