Maybank Q1 Earnings Preview: Market Tailwinds Expected to Continue Outpacing Headwinds

Maybank is expected to release its FY24Q1 financial report on May 24th. According to Bloomberg, the consensus revenue is RM7.12 billion. The consensus EPS is RM0.2.

Analysts believe an economic rebound will boost loan demand growth, and non-interest income is also expected to perform well. According to the analyst rating feature on moomoo, there have been ratings from 18 analysts, of which 34% have given a 'Buy' rating, and 56% have given a 'Hold' rating.

Bank Negara Malaysia's data reveals a 4.2% growth in Malaysia's Q1 economy, outpacing the expected 3.9% and hitting a one-year high. Malaysia's growth slowed last year due to weak exports, but the latest GDP indicates that robust private consumption has boosted the economy, and there has been a recovery in external demand. CIMB Research stated: "Upward revisions drove growth in all sectors except manufacturing." The strong GDP provides a bright outlook for the continued economic rebound and growth in loan demand.

Kenanga reports that March 2024 saw a 6.0% increase in bank loans from the previous year, with household loans up by 6.3%, fueled by rising mortgages, and commercial loans growing by 5.6%. Loan applications jumped, with consumer and business requests up 25% and 14% respectively, likely due to higher borrowing for Hari Raya spending. The NPL ratio improved to 1.62%, down from 1.64% in February 2024 and 1.74% in March 2023, suggesting better asset health amidst economic recovery and growing repayment abilities.

Despite being below the 9% loan growth rate of FY2023, Maybank has set a loan growth target of 6%-7% for the 2024 fiscal year, which remains a stable expansion. Domestically, an increase in market share is expected due to a rise in subprime mortgage transactions, as some competitors may lose interest in aggressively pursuing this segment. Moreover, Maybank is also strengthening collaborations with small and medium-sized enterprises. Its global banking business unit benefits from high growth status in Indonesia and a growing corporate investment portfolio.

In the FY2023, the Net Interest Margin (NIM) was compressed by 27 basis points due to intensified competition in the deposit market. While the bank believes similar pressures may have largely subsided, it still anticipates a compression in NIM for the fiscal year 2024, with an expected decrease of 5 basis points. Kenanga believes that despite an increase in overall loan demand due to the improving economic outlook, banks now must compete more aggressively to maintain their share of the financing market. This competition may therefore impact loan interest rates.

Sustainable Increase in Non-Interest Income (NOII). The group enjoyed a 38% surge in NOII in the FY2023, primarily driven by a spike in treasury earnings. While the impact of this segment may moderate in the 2024 fiscal year, there could be stronger momentum from fee-based income, and the wealth management business also seeks to penetrate regional markets. Additionally, Etiqa's insurance performance may improve, benefiting from efforts to boost bancassurance and automotive insurance products.