KUALA LUMPUR (May 28): Analysts have raised Malayan Banking Bhd (Maybank) earnings forecasts after its net profit for the first quarter ended March 31, 2021 (1QFY21) beat expectations.

Hong Leong Investment Bank Research’s analyst Chan Jit Hoong said in a note today that Maybank's 1QFY21 net profit of RM2.4 billion (+56% quarter on quarter, +17% year on year), came in at the upper-end of estimates, forming 32% to 34% of both his and consensus full-year forecasts.

He opined that the stronger net interest margin (NIM) contributed to the better overall bottom line growth.

“Since 1QFY21 results were at the upper-end of expectations, we raise Maybank FY21 to FY23 earnings by 5% to account for stronger NIM and reverse the 25 basis point (bps) overnight policy rate (OPR) cut that we had earlier baked into our projections,” he said.

Chan expects NIM to remain stable premised on no OPR reduction and benign deposit competition in 2021. Also, loan growth is anticipated to stay resilient.

While gross impaired loan (GIL) ratio is likely to creep upwards, he is not overly worried as Maybank already made heavy pre-emptive provisioning in FY20.

“In our view, credit risk has been adequately priced in by the market, looking at the high net credit cost (NCC) assumption applied for FY21 by both us and consensus (above the normalized run-rate but below FY20’s level),” he said.

Furthermore, he believed the government and Bank Negara Malaysia will remain supportive in helping troubled borrowers, limiting a significant sag in GIL ratio.

He retained "buy" on Maybank and revised up its target price (TP) to RM9.40 from RM9.20, based on 1.22 times FY22 price to book.

Meanwhile, Affin Hwang Capital’s analyst Tan Ei Leen said Maybank’s 1QFY21 net profit exceeded her estimate by about 7% and the group outperformed her fund-based income forecast.

She also noted, Maybank has turned more positive on its NIM guidance (10 to 15bps expansion from "flat" previously) and cost to income ratio (CIR) target (45% to 46% from 46% to 47%) for 2021.

“We believe that these revisions could lead to a better return on equity (ROE) and re-rating in the share price,” she said.

She also raised Maybank net earnings forecasts for FY21 by 7.4%, FY22 by 5.1% and FY23 by 12.2% as she raised the group's NIM by another 15bps to 2.25% and loan growth from 2% to 3% year on year.

“We adjust our NCC forecasts to 76bps in 2021 (from 80bps) and 60bps in 2022 to 2023 (from 50bps),” she said.

She maintained her "buy" rating on Maybank, and lifted its TP to RM10.30, from RM9.40, underpinned by a 2022 estimated ROE of 9.4% and cost of equity of 7.7%.

Kenanga Research’s analyst Clement Chua also said in a note that Maybank’s net profit was above expectations, thanks to better-than-expected NIMs with some improvements in CIR.

“The group looks to continue to enjoy access to cheap funds with its income streams to progressively gain traction in line with regional economic recovery,” he said.

He raised Maybank FY21/FY22 earnings by 9%/5.3% as he accounted for more optimistic NIMs.

He maintained "outperform" on the group and revised its TP to RM10.75 from RM10.60.

“Maybank is still our favourite for the banking sector for its most favourable risk-to-reward with the highest dividend yield (7% to 8%) in the industry paired by solid ROE prospects.

“Its market leading position in loans and deposits should prove beneficial in an economic recovery phase while its current accounts and savings accounts-to-deposit ratio of about 40% would ease access to funds,” he said.

Maybank, which was the fifth top gainer this morning, rose 24 sen or 3.02% to RM8.18 at the time of writing, valuing the group at RM95.08 billion.