A fearless forecast on Maybank's net profit for FY12F-14F

Find out why Nomura raised its profit forecasts by 7-8%.

Nomura notes that over the last three years, Maybank has raised its RoRWA by 60bps to 2.1% through the adoption of the Basel II IRB approach in calculating riskweighted assets, as well as boosting its non-interest revenues. 

Here's more from Nomura:

The recent private placement and dividend reinvestment programme has ensured that the group operates from a comfortable CET1 ratio of 9.9%, versus CIMB at 8.6% and Public Bank at 8.3%.

Going forward, we believe the bank will be able to sustain its RoRWA of 2.1%, which on our calculations, would result in a comfortable core equity Tier 1 ratio of 10.3% by FY14F, after imputing a dividend payout of 50% and a 10% annual increase in RWAs.

Catalysts: Removal of election overhang, 2H13F OPR hike
Malaysia banks could see a boost post general elections once the political risk premium subsides. Another potential catalyst is a 50bp OPR hike which we expect in 2H13F and believe would benefit bank NIMs.

TP upgrade to MYR10.60 on rolling forward to FY13F valuation
We have incorporated the recent MYR3.66bn private placement into our forward year equity base, which will dilute sustainable ROE to ~14%. At the same time, we have raised our FY12F-14F net profit forecasts by 7- 8% to take into account a stronger contribution from BII (6.9% of group earnings versus 5.8% previously), higher Islamic business and stronger cost discipline as evidenced by the recent 9MFY12 earnings report.

Our Gordon-growth based TP assumes a sustainable ROE of 14.1%, cost of equity of 9.1% and terminal growth of 3.7%, which implies a target P/BV of 1.9x and P/E of 14x. Maybank is one of our top Malaysia banks picks.