- We maintain HOLD on Malayan Banking Bhd (Maybank) with an unchanged fair value of RM9.40/share. This is based on an ROE of 12.6% for FY15F, leading to an unchanged fair P/BV of 1.6x.

- Maybank’s net earnings for FY14 was 2.2% above our forecast and 4.8% above consensus. The main positive surprise was a positive write-back in loan loss provision recorded in this quarter.

- Total dividend for FY14 amounted to 57 sen, above consensus forecast of 51 sen. The payout ratio increased to 78.5% in FY14F from 71.9% in FY13F. We believe the market had expected a payout range of 70% to 75%. Thus, the payout was above expectations.

- The pace of group loans growth picked up significantly, closing the year at 13.4%, above the target of 13.0% for FY14F, and well above the annualised growth rate of 9.4% as of 3QFY14. However, like most other banks, the main pressure is on NIM, which had fallen 10bps QoQ on account of higher cost of deposit.

- We believe there was some windfall gains from forex line, with forex gain nearly doubled to RM302.0mil in 4QFY14 from RM173.9mil in 3QFY14. We believe this came partly from revaluation of its USD assets. This made up ~16% of its total asset portfolio, for which less than 100% had been hedged.

- Gross impaired loans balance has stabilised (-2.2% QoQ in 4QFY14), following the large spike upwards of 13.9% QoQ in 3QFY14. Total credit cost was a benign 11bps in FY14, attributable to better recoveries and better PD and LGD data. This was therefore ahead of the company’s credit cost target of 30bps to 33bps for FY14F.

- Loan loss cover was broadly unchanged at 95.6% in 4QFY14, compared with 95.4% in 3QFY14. This is a marginal disappointment to us, given that the company had hinted in earlier briefings that it was likely to eventually move back the loan loss cover to above 100%. The company reiterated that it intends to take the loan loss cover back to 100% in the medium term.

- On the whole, the 4Q results were decent, given the better dividend yield and more stable asset quality trend. We expect the share price to be supported by dividends. We maintain HOLD.

Source: AmeSecurities