Hold' rating kept on Maybank: AmResearch

KUALA LUMPUR: AmResearch maintains HOLD rating on Malayan Banking Bhd, with an unchanged fair value of RM9.90 per share.

AmResearch said recent loan demand trend is probably slow and while the corporate and non-consumer loan demand trends have been strong in January, these are essentially based on drawdown plans put in place before the end of 2013.

"We expect corporate loan disbursements to have been more subdued in February. As for consumer loans, there are indications that primary launches have slowed down. Maybank is usually active in primary launches, and has so far re-shifted its focus to secondary market financing to make up for the slower primary market launches."

In noted that the company is also maintaining its overall group Loan-deposit ratio (LDR) target at 85-90 per cent.

"The reported LDR was 89.9 per cent as at end-December 2013. We understand that LDR remains a key focus for the group, although if the company believes that a particular loan is of good credit quality, it may go ahead with the loan and let LDR increase, as it expects to easily tap into medium-term financing for funding later.

"However, if LDR increases well above its internal target of 85-90 per cent, the company is likely to withdraw from lending in order to let LDR ease back. To us, there is an implication of a loans being possibly crimped if the industry deposit growth remains subdued.

"A possible local incorporation in Singapore would mean an increase in investments in subsidiaries and associates. This creates uncertainty over its Common Equity Tier 1 (CET1), in our view, in the short term."

Maybank added that the company hinted that its financial year 2014 key performance indicators (KPI) targets are based on a best-case scenario for this year, i.e. achieving group loans and deposit growth targets of 13 per cent.

"Looking ahead, we remain uncertain over the mark-to-market (MTM) losses for its securities portfolio, the impact to bank level CET1 ratio from possible incorporation of Singapore, weaker domestic growth environment overall on the banking industry, and high LDR ratio. We maintain our HOLD rating on Maybank."