Benefiting from OPR upcycle in 2Q22
? 1Q22 net profit was within our expectation (25% of our full-year forecast);
1Q22 net profit fell 14.5% due to weak investment income and CM taxation.
? We expect Maybank’s 2Q22 net profit to rise by single-digit rates yoy and qoq
due to the positive impact from the OPR hike.
? Reiterate Add, premised on our expected improvement in LLP and margin
expansion from the OPR hike. Dividend yield is attractive at 4.7% for FY22F.
1Q22 net profit within expectations
Maybank’s 1Q22 net profit was within expectations, as it accounted for 25% of our full-year
forecast and 24% of Bloomberg consensus’ estimate. 1Q22 net profit fell 14.5% yoy,
dragged down by: 1) a 28.4% yoy decline in non-interest income (weaker investment and
insurance income), and 2) additional tax expense under Cukai Makmur (CM), which led to
a 19.1% yoy rise in 1Q22 taxation and an increase in tax rate from 23.4% in 1Q21 to 29.8%
in 1Q22. Excluding CM taxation (assuming a tax rate of 24% for 1Q22), Maybank’s 1Q22
net profit would have declined by a smaller 7.3% yoy. 1Q22 net profit fell by 0.6% qoq, due
to a 181.9% qoq surge in loan loss provisioning (LLP). The qoq surge in 1Q22 LLP was
within our expectation due to a significantly low base in 4Q21.
Benefiting from the OPR hike in 2Q22F
We expect Maybank’s net profit to increase qoq to RM2.05bn-2.1bn in 2Q22F as it will start
to benefit from the positive impact from the hike in the overnight policy rate (OPR). We
expect yoy net profit growth of 4-7% in 2Q22F. The OPR hike would help to cushion some
of the negative impact from lacklustre investment income (due to losses from fixed-income
securities amid rising interest rates) and CM taxation in 2Q22F.
Raising our EPS forecasts …
We are reflecting another 25bp hike in OPR in our estimates (we reflected 25bp hike
previously). Meanwhile, we raise our assumed share base for Maybank from 11.87bn to
11.97bn, mainly due to 91.5m new shares issued under its dividend reinvestment plan.
Consequently, our EPS forecasts are lifted by 0.7% for FY22F and c.1% for FY23-24F.
… and target price
For our DDM valuation, we: 1) raise our assumed risk-free rate from 3.8% to 4% (given the
interest-rate hike), and 2) narrow the discount to the DDM value from 10% to 5% (due to
the easing of pressures from credit risks). These, coupled with the changes in EPS
forecasts, lead to an increase in our target price from RM9.80 to RM10.00.
Reiterate Add on Maybank
We reiterate our Add call on Maybank premised on the potential re-rating catalysts from
the expected improvement in its LLP in FY22F and an expansion in its net interest margin
after the OPR upcycle commences in May 22. We also deem its FY22 dividend yield of
4.7% attractive.