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Tuesday, February 19, 2019

Malayan Banking Berhad - Strong Earnings Growth in Indonesia

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INVESTMENT HIGHLIGHTS

  • Strong earnings in FY19 for Maybank Indonesia
  • NII moderated income decline
  • Asset quality stable
  • Loans book expanded but deposits declined
  • No change to our forecast for Maybank Group
  • Maintain BUY with unchanged TP to RM11.40 based on PB multiple of 1.6x
Key takeaway. We participated in a briefing by the management of Maybank Indonesia yesterday. Below are the key takeaway:
  • FY18 saw strong earnings growth and highest PATAMI in its history.
  • Loans growth and asset quality improvement led to the good performance.
  • Sufficient funding and liquidity.
Strong earnings in FY18. Maybank Indonesia posted an earnings growth of +21.6%yoy to IDR2.26t, mainly supported by lower provisions. Provisions fell by -38.6%yoy as asset quality improved with gross NPL ratio declining -0.22ppt(yoy) to 2.59%.
NII moderated income decline. Total income in FY18 came in flattish at -0.7%yoy for Maybank Indonesia. This was due to the - 17.3%yoy decline in NOII. However, NII had moderated this impact as it grew +5.2%yoy despite operating in a policy rate hike environment. Note, in Indonesia, deposit rate are repriced faster than interest rate after a policy rate hike. Interest expense fell -5.8%yoy to IDR6.69t while interest income fell only by -0.1%yoy to IDR14.79t in FY18.
Loans book expanded but deposits declined. As at end 4QFY18, Maybank Indonesia’s loans book expanded +6.3%yoy to IDR133.3t. The growth was driven by non-retail segment where it grew +10.9%yoy to IDR58.3t. Of this, business banking and SME loans grew +9.8%yoy and +12.4%yoy to IDR34.0t and IDR24.3t respectively. Meanwhile, deposits from customers contracted -3.7%yoy to IDR116.8t as CASA fell -8.3%yoy to IDR44.5t. Despite liquidity remained tight, its LCR and NSFR (both bank only) stood at above regulatory requirement of 100% at 116.6% and 107.2% respectively. The management indicated that measures already in place to manage liquidity in addition to selective loans growth.
Source: MIDF Research - 19 Feb 2019

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