While near-term prospects of the Group may continue to be weighed by pockets of asset quality concerns, we reckon the worst is likely to be over for the Group and the industry at large. – Bernama photo
KUCHING: Analysts across the board are enthusiastic over Malayan Banking Bhd’s (Maybank) next five-year business strategy (2021–2025) known as M25.
M25 focuses on three long-term outcomes: to attain sustainable return on equity (ROE); achieve top rated customer experience through digital and hybrid services; and become a regional leader in environmental, social and corporate governance (ESG).
By end-2025, the group aims to achieve an ROE of 13 to 15 per cent, cost-to-income ratio (CIR) of less than 45 per cent, earnings per share of more than 100 sen per share and dividend payout ratio between 40 to 60 per cent.
While much of it was “big-picture” undertakings, Public Investment Bank Bhd (PublicInvest Research) saw that the intended financial-related targets which were also highlighted could well present Maybank as an attractive medium- to longer-term investment proposition if successfully achieved.
“We are optimistic that a large portion is attainable given management’s resolve and the Group’s leadership position, though the latter may also prove to be a potential impediment depending on stakeholders’ buy-ins.
“Near-term, recent cost management and funding-related initiatives stand the Group in strong stead to capitalize on impending earnings recovery momentum, post-Covid.
“While near-term prospects of the Group may continue to be weighed by pockets of asset quality concerns, we reckon the worst is likely to be over for the Group and the industry at large.”
Kenanga Investment Bank Bhd (Kenanga Research) came out feeling reassured by the aspirations presented by management.
“We view these targets to be achievable by 2025, given that we are expecting the group to organically improve its ROE in FY22E to 10.3 per cent which are pre-pandemic levels,” it commented in its analysis yesterday.
“Summarising our key takes, Maybank has identified effective channels to bolster its top-line prospects which are also cost effective that could translate to better profits, thereby meeting its 2025 goals.
“While this is caveated by variables in regional policies and regulations, the tone set by management plays a crucial role in steering the group towards the right direction.”
Overall, Hong Leong Investment Bank Bhd (HLIB Research) liked the many strategies put forth by Maybank over the next five years.
“We find it has a lot of levers to pull in order to realise its 2025 business as usual ROE,” it opined.
“From our calculations, it does not appear to be stretched: total income only has to grow by a five-year cumulative annual growth rate (CAGR) of 2.2 per cent while opex expansion must be contained at a softer clip of 1.3 per cent.
“The projected CIR is circa 43 per cent but note, we also assumed net credit cost normalisation to 35 basis points (bps) from 88bps in 2020.”
Besides, HLIB Research said the 13 to 15 per cent aspirational ROE target is not far-fetched, where it estimated top-line just need to increase by a five-year CAGR of 3.7 per cent with CIR dipping to circa 40%.
“Even if Maybank’s cost base inflation rises faster than expected, we reckon it has room for capital management, considering high CET1 ratio of 15.3 per cent, which can also help to lift ROE further.”