RHB downgraded Malayan Banking, or Maybank, to Neutral from Buy after its first quarter results missed expectations on higher provisions and subdued operations.
“While we like Maybank for its balanced loans portfolio, healthy liquidity position and robust capital base, we believe the stock price will continue to underperform until earnings outlook improves,” RHB said in a note last week.
The brokerage said Maybank’s profit after tax and minority interests of 1.81 billion ringgit (S$594.0 million or US$432.44 million), down 3 percent on-year, was only around 21 percent of its full-year forecast.
The key drag was a 27 percent on-year increase in net impairment losses, with loan credit cost rising to 47 basis points, up from 41 basis points in the year-ago quarter, RHB said. Net interest margin, or the difference between the interest rate banks charge to lend and their cost of funds, fell by 8 basis points on-quarter, the note said.
The brokerage also estimated the top-up provision for its exposure to Tuaspring was around S$223 million, after the bank said only that it was based on an assumption of zero dollar for the water plant and discounted cash flow for the power plant.
RHB cut its 2019-21 earnings forecasts by 4-7 percent after the weak results, and lowered its target price to 9.50 ringgit from 11.00 ringgit.
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