Malayan Banking Berhad (AR 2018)

Corporate Profile

• First company that breach RM 100 billion in market capital in Malaysia
• 48% owned by PNB and its fund, 12% by EPF and 19% by foreign fund. 

• Maybank is presence in 18 countries with 2,601 retail branches with Malaysia, Singapore and Indonesia as its main market. 
• Malaysia contributes 70.1% of its PBT followed by Singapore 12.2% and Indonesia 6.9%. (overseas contribution of PBT is 29.9%)

• Maybank business are divided into 4 categories: 
• Islamic Banking
• Leading provider of Islamic financial product and services in ASEAN
• Domestic market leader in total asset, total financing and total funding
• Contribute 59% to Maybank's financing in Malaysia
• Etiqa
• Offering full range of life & general conventional insurance policies as well as family & general takaful plan
• Etiqa is presence in Malaysia, Singapore, Philippines & Indonesia with over 8100 agents, 46 branches and 17 offices. 
• Maybank Kim Eng Group
• Invesment arm of Maybank Group namely Maybank Investment Bank (focus on operation in Malaysia) and Maybank Kim Eng (focus on overseas operation).
• Maybank Kim Eng has operation in 9 countries namely Singapore, Thailand, Philippines, Indonesia, Vietnam, Hong Kong and US with a total of 155 retail branches globally 
• Maybank Asset Management
• Currently has RM 26 billion of assets under the management

• 47.5% of PBT are from community financial services, 45.7% of PBT are from global banking while 6.8% of PBT are from islamic insurance (Etiqa). 

• 4th largest bank by total asset in ASEAN
• 6th largest bank in term of market capital. 

Financial Performance

• Interest income and net interest income grew at CAGR of 5.38% & 4.47% respectively from 2014 - 2015.
• Net interest margin remain stable at 2.3% - 2.4% throughout the 5 years.
• Income from islamic banking operation grew at CAGR of 11.4%.
• Etiqa insurance premium grew at CAGR of 8.5%.
• Total operating income and net profit income grew at CAGR of 4.9% and 3.87% respectively throughout the 5 years (which is in line with their interest income growth)
• Overheads to income ratio reduced by 1% to 39% in 2018.
• Its profit hitting the RM 8 billion benchmark for the first time. 
• Net profit margin remain stable at approximately 30%. 
• Dividend payout ratio is at 75 - 77% (one of the most generous dividend payout company in the industry).
• Percentage of impairment losses on loan, advances and financing improved greatly to 13% in 2018. 
• ROE improved from 9.88% in 2016 to 10.75% in 2018. 
• Total loan and deposit grew at CAGR of 4.79% & 3.92% respectively.
• Loan to deposit ratio for Maybank is on the high side where they use 98% of their deposit collected to borrow out to their clients. 
• Non performing loan ratio increased from 1.52% in 2014 to 2.41% in 2018 (however 2.41% is still consider acceptable). 
• Risk weight capital ratio is 19.02% which is well above the 8% set by bank negara. 

Future Outlook

• Focus on digital banking by launching QRpay, form partnership with grab to increase the usage of cashless payment, implement E-CLEVA (real time video assistance claim for motor and fire insurance, allowing claims to be processed via video calls within 15 min), launched MAE.

• Market outlook sounds competitive in its 3 main markets. 

Strength

• Diversified business income (involved in islamic insurance where the business is growing exponentially with CAGR of 8.5% from 2014 - 2019) 
• Generous with its dividend payout with 6% dividend yield which is highest amount the region. 
• Stable earning

Weakness 

• Finance industry remain to be challenging moving forward. 

Valuation @ RM 9.27

• At RM 9.27 a share, PE for Maybank is 12.62 which is deemed fairly valued as its futures prospects seems challenging moving forward. 

Technical Analysis

• Maybank is currently on a downtrend with the price trading below its moving average. The nearest support will be at 9.15, follow by 8.70 and 7.96.