Maybank’s loan growth expected to moderate

Partly due to slower Malaysian consumer growth.

The loan growth of Malaysia-based Maybank is expected to moderate from the Mar-14 run-rate of 14% on slower Malaysian consumer and Indonesian corporate growth.

According to a research note from Nomura, management's loan growth target for FY14 is 13%.

Management is guiding for margins decline of 10bp on the downward repricing of its Malaysian mortgage portfolio and a tougher Indonesia environment.

Nomura believes that 2H14 NIMs could see an improvement due to the recent OPR hike, as Maybank has the strongest CASA franchise in Malaysia.

Nomura also expects Maybank’s asset quality to remain stable with the group’s loan loss coverage at 108%. The NPL formation is coming mainly from Indonesia business banking.

Management is likely to retain its 15% ROE target, the report noted.

Here’s more from Nomura:

AMMB - Key things to watch:

So far loan growth has been sluggish at 5%, but we expect this to improve to ~9%, driven by corporate and business segments.

We expect the overall group NIMs to decline due to the compression from the consumer division – management is expecting a significant 15bp squeeze this year.

Watch for exceptional gains from the sale of a 50% stake in the life insurance business, which was completed in April 2014. Management had earlier indicated that the gains are likely to be offset against various provisions. Asset quality remains robust – look out for any weakness in the auto loan space where the sector NPL has risen to 1.4% in June from 1.3% in March.

Our earnings growth estimate for FY15-16F averages 10%, in line with management’s target of 9-11%.

CIMB - Key things to watch:

We expect CIMB to continue outpacing the industry loan growth, although the outlook in Indonesia remains challenging.

We believe group NIMs will probably remain weak this year, as CIMB Niaga is still experiencing stiff competition for deposits. However, the recent increase in the Overnight Policy Rate in Malaysia should help improve domestic margins.

The cost efficiency of the domestic consumer business is expected to continue its improving trend on higher staff productivity, in our view.

Overall asset quality remains good, although we note some weakness in Indonesia where there has been NPL formation in the corporate sector.

Management may lower its FY14 ROE guidance (currently at 13.5%-14%) given the weak operating environment in Indonesia.

Hong Leong Bank - Key things to watch:

Management continues to drive LDR higher to mid-80%s over the medium term, which is supportive of margins. We believe that FY15F NIMs should improve from the current level of ~2.0% with the recent OPR rate hike.

We expect the loan growth to rise to 9-10% from 8% last year on the strength in mortgages and SMEs.

We expect the asset quality to remain robust. Hong Leong Bank has one of the highest loan loss coverage in the sector at 129%.

Cost income ratio is likely to trend lower to about 43% from 44% in 1HFY14F, in our view.

RHB Capital - Key things to watch:

We expect margins to come under pressure given the change in the loan mix in favour of lower-yield residential and commercial mortgages. Personal consumer finance could slow down given the weak outlook.

Management is aiming for a loan growth target of 12% this year, which is similar to last year’s run-rate. The growth will be led by mortgages, ASB unit trust financing and working capital loans for corporate, according to management.

We expect the cost-income ratio to stay above 50% this year as the group has been investing in talent in the investment banking division, although this will be partly offset by efficiency gains in commercial banking.

Asset quality has been stable so far, but management may take the opportunity to raise the loan loss coverage of 68%, which is among the lowest in the industry, in our view.

Management is likely to retain its >12% ROE target, in our view.