JP Morgan Research: Maybank ‘too aggressive’ with 2025 targets

Asset quality will be one of the key risks for the financial institution in achieving the target


MALAYAN Banking Bhd (Maybank) may have been a little too “gung-ho” when setting their targets two years down the road.

“We view the 2025 targets set by the management as too aggressive, hence ascribe a high probability on the bank missing those. Asset quality is one of the key risks in our investment thesis, particularly in the oil and gas (O&G) sector, as it tends to be chunky,” JP Morgan Research said in a research note released last week.

The foreign research house is ‘Underweight’ on Maybank, maintaining the target price of RM8. Maybank closed at RM8.65 when the research note was released last Friday. It closed at RM8.47 yesterday.

Another factor leading to its ‘Underweight’ tag on Maybank was asset quality concerns, along with limited pre-provision operating profit drivers.

“A key source of risk is its exposure to a large O&G industry, where the nature of credits tends to be chunky. The bank has 3% of loans in non-retail O&G, with 30% of those in non-performing loan, special mention and watch-list. The bank has provided for some of these exposures, but a sharper than expected deterioration in exposures in 2022-2024 cannot be ruled out,” it said.

The ‘Underweight’ rating means that the research house deems that over the next six to 12 months, the stock will underperform the average total return of the stocks in the analyst’s coverage universe.

The report said the Etiqa IPO poses the single-largest upside risk to the stock, in addition to a pick-up in corporate loan demand.