KUALA LUMPUR (April 12): Malayan Banking Bhd (Maybank) said the group’s five-year strategy known as M25, which outlines the financial services provider’s plans and goals from 2021 to 2025, is anchored on its purpose of humanising financial services which espouses three aspects, namely a sustainable return on equity (ROE), top-rated customer experience, and being a regional environmental, social and governance (ESG) leader at a time when the global economy is contending with Covid-19 pandemic-induced uncertainties.
Maybank said in its latest corporate presentation last Friday (April 9) that it saw heightened uncertainty in the global economy in the past five years, impacting the banking sector's ROEs.
"Exacerbating this environment were the recent pandemic-induced uncertainties. Our purpose has been refreshed to reflect long-term priorities and a new operating landscape,” said Maybank in its presentation, the details of which were quoted by analysts in their reports today.
Maybank said investment trends continued to show increasing spend on digitalisation efforts across the ASEAN region, even during the recent Covid-19 pandemic, with more users being onboarded onto digital banking platforms.
According to Maybank, companies with high ESG performances relative to their sector peers have done well and continued to attract capital.
Maybank said the group’s strategic priorities involve being pervasively digital, new value drivers and sustainability.
"Pervasively digital represents our digital efforts to strengthen and deliver more value to our stakeholders, guided by the core principles of experience, trust and resilience.
"New value drivers go beyond the current business as usual and represent new business growth opportunities covering SMEs (small and medium enterprises), wealth, trade, ESG and digital. These are transformative initiatives meant to help us grow over the long term and sustainably build our competitive edge.
"We aim to defend and grow our customer base, generate income more effectively and efficiently, provide beyond financial services, and fortify our propositions in the different markets we serve.
"We aim to drive the change for a better world and partner clients to achieve sustainable growth. Our sustainability agenda is predicated on three key pillars, [including] enabling a responsible transition to a low carbon economy, empowering our communities, and leading by example with good governance practices,” Maybank said.
Today, RHB Investment Bank Bhd analysts Muhammad Danial Abd Razak and Eddy Do Wey Qing wrote in a note that RHB maintained its "buy" call for Maybank shares, with an unchanged target price (TP) of RM10, following the announcement of the five-year strategy which emphasises sustainable and responsible profitability.
Digitalisation and ESG take the centre stage of the M25 plan, according to the analysts.
"The group (Maybank) has identified four new profit drivers of its aspirational ROE target of 13%-15% by 2025. RM50 billion will be mobilised for sustainable financing by 2025. The lender will also steer its borrowers to achieve better ESG standards and adopt best practices.
"Maybank sees room for consolidation in the Malaysian banking sector but that does not fit into the group’s strategy. The aspirational ROE will be purely from organic growth (no merger and acquisition or M&A scenarios). The 'sustainable' capital ratio will largely depend on the regulators’ opinion.
"[There is] no plan [by Maybank] to spin off Etiqa at the moment as both parties aim to deepen the relationship. We are positive about its digital innovations: Maybank is now capable of approving retail SME loans in 10 minutes, with the process being completed on its app. A credit rating model (using artificial intelligence) is being refined, which could potentially be a game changer for the group,” the analysts said.
Meanwhile, TA Securities Holdings Bhd analyst Wong Li Hsia said TA foresees robust earnings growth potential for Maybank, thanks to its established regional presence, which will allow the bank to tap into rising ASEAN trade and cross-border opportunities.
Wong said TA is also positive on Maybank's new value drivers, which focus on ESG and digitalisation.
"This, we opine, would open new market opportunities, such as driving financial inclusion for SMEs and enhance the banking experience for customers in wholesale banking, wealth and Islamic banking. However, we see heightened volatilities in the past five years, exacerbated by the pandemic, to remain in 2021 and 2022. Due to these uncertainties, banks may have to contend with a prolonged low interest rate environment.
"Nevertheless, the global economy is envisaged to gradually recover following the development and deployment of Covid-19 vaccines, along with accommodative monetary policies and expansionary fiscal policies, although recovery is expected to be uneven across industries and geographies.
"[There is] no change to our earnings estimates (for Maybank). We maintain Maybank’s TP at RM10.80. Our valuation is based on an implied P/BV (price-to-book value) of about 1.38 times based on the Gordon Growth Model. With that, we reiterate our 'buy' recommendation on the stock,” she said.
At the 12.30pm break on Bursa Malaysia today, Maybank’s share price settled up two sen or 0.24% higher at RM8.31, giving it a market value of about RM93.4 billion.
Maybank has 11.24 billion issued shares, according to the group’s latest quarterly financial report.