Maybank poised to benefit from rotational recovery play

The bank’s 5-year business strategic plan is aimed at achieving a sustainable ROE and boosting customer experience through digital and hybrid services


MALAYAN Banking Bhd’s (Maybank) risk-reward profile is skewed to the upside as the banking group is a prime candidate for rotational recovery play among FTSE Bursa Malaysia KLCI constituents, analysts say.

Several research firms maintained their upbeat stances on the country’s largest lender by assets after the bank unveiled its five-year business strategic plan for 2021 to 2025, aimed at achieving a sustainable return-on-equity (ROE) and boosting customer experience through digital and hybrid services, among others.

The new blueprint supersedes the previous Maybank 2020 (M20) strategy which focused on strengthening the bank’s position in Asean across all key businesses.

Maybank aims to achieve an ROE of between 13% and 15%, cost-income ratio of not more than 45%, as well as earnings per share of over 100 sen and dividend payout ratio of up to 60% of earnings by the end of 2025.

The new profit drivers have been identified to lift the group’s business-as-usual ROE of 11.5% to its aspirational ROE target of 13% to 15% by 2025.

Hong Leong Investment Bank Bhd (HLIB) analyst Chan Jit Hoong, in a note yesterday, described Maybank’s strategies, as compelling as the bank, has a lot of levers to pull to realise their 2025 financial aspirations.

“We believe Maybank can replicate M20’s success. All in all, no change to our financial year 2021-2022 (FY21-22) profit forecast and introduced FY23 estimates. We still like Maybank for its regional exposure and leadership position. It also offers superior dividend yield,” he stated.

HLIB maintained its ‘Buy’ call on Maybank with a target price (TP) of RM9.20, based on 1.22 times FY21 price-to-book value (P/BV) with assumptions of 8.4% ROE, 7.4% cost of equity, and 3% long-term growth.

Chan said the 13%-15% aspirational ROE target is not far-fetched, as initial estimates suggest the bank’s top-line just needs to rise by a five-year compound annual growth rate of 3.7% with cost income ratio (CIR) dipping to 40%.

He noted even if Maybank’s cost base inflation rises faster than expected, there is room for capital management, considering high common equity tier-1 ratio of 15.3%, which can also help lift ROE further.

The investment bank stated Maybank’s risk-reward profile is skewed to the upside as the bank is also less susceptible to foreign equity sell-off.

AmInvestment Bank Bhd (AmInvest) analyst Kelvin Ong viewed Maybank’s targets as achievable as it has already reported a CIR of 45.4% in FY20, while its average ROE was circa 11% over the last four years prior to FY20.

“Under the pervasive digitalisation priority, the group aims to evolve from just a financial services provider to a customer’s lifestyle partner with wraparound experiences built within Maybank’s services, products and platform.

“We see this as essential to build stickiness with customers before restrictions on digital banks’ assets expansion are eventually eased three to five years later when five new licences are awarded in early 2022,” Ong said.

AmInvest maintained its ‘Buy’ call on Maybank with a revised fair value of RM10.10 per share (previously: RM9.80/ share) based on FY22 ROE of 10% leading to a P/BV of 1.3 times. It did not make any changes to the earnings estimates.

Public Investment Bank Bhd (PublicInvest) head of research Ching Weng Jin said the intended financial-related targets highlighted by Maybank could present the group as an attractive medium-to-longer term investment pro-position if successfully achieved.

PublicInvest is optimistic a large portion is attainable given Maybank’s 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.

PublicInvest raised its call on the banking group to ‘Outperform’ with a higher TP of RM9.30 (RM8.80 previously) with minor changes made to the long-term growth assumptions to its dividend-discount model.