KUALA LUMPUR (Jan 7): Malayan Banking Bhd (Maybank) shares dipped in early trade on Wednesday on concerns of its exposure to the 1Malaysia Development Board (1MDB) loan default.

At 9.11am, Maybank fell 1.93% or 17 sen to RM8.63 with 2.84 million shares done.

CIMB Research has maintained its “Add” rating on Maybank at RM8.80 with an unchanged target price of RM12.50 and said the market was concerned about Maybank’s exposure to 1MDB as the local press reported that 1MDB failed to pay a RM2 billion loan due on 31 Dec 14.

In a note Jan 6, CIMB Research said it gathered that Maybank’s loan exposure to 1MDB could amount to RM5.5 billion.

It said a 10% provisioning for this would trim Maybank’s FY15 net profit by 5.6%, based on house estimates.

“However, the above risks would be reduced by the government’s guarantee and 1MDB’s listing plans. Our DDM-based target price (COE of 9.7%; LT growth of 4%) is intact.

“Despite this possible hiccup, Maybank remains an Add and our top pick for the sector, as it would benefit from the expected improvement in the Indonesian operating environment and regional expansion drive,” it said.