The Covid-19 outbreak in 2020 threw a challenge like no other to banks around the world. To its credit, Malayan Banking Bhd (Maybank), the largest lender in Malaysia and fourth largest in Southeast Asia, has navigated through the worst of it admirably.
A good run in its share price that began several months after the initial Movement Control Order (MCO) that year, as well as its ability to pay out commendable dividends — both a testament to its resilience — led to Maybank clinching The Edge Billion Ringgit Club (BRC) award for the highest returns to shareholders over three years in the financial services sector.
Over the BRC review period from end-March 2019 to end-March 2022, Maybank delivered a three-year compound annual growth rate shareholder return of 7.4% — the highest among peers with a market capitalisation of at least RM10 billion.
Maybank’s share price, which stood at RM7.026 as at end-March 2019, sunk to an over five-year low of RM5.718 on March 19, 2020, a day after the country’s first MCO began. Then, like other local banks, it began a steady climb in November as global stock markets rallied amid expectations of improving economic prospects as Covid-19 vaccines were beginning to be rolled out.
Between end-March 2019 and end-March 2022, its share price gained 23.2% to RM8.657.
The share price has since come down, shedding 4% to close at RM8.58 on Oct 28, which gives the company a market capitalisation of RM103.42 billion. It remains the largest company by market value on the stock exchange.
As for dividends, Maybank rewarded shareholders with a gross dividend per share (DPS) of 64 sen in the financial year ended Dec 31, 2019 (FY2019) — the highest since FY2012 — which was fully in cash. This was equivalent to a payout ratio of 87.8%, well above its long-term dividend payout policy rate of 40% to 60%.
In FY2020, the first year of the pandemic, Maybank’s total DPS fell to 52 sen (of which the cash portion was 34%) before improving to 58 sen in FY2021 (cash portion, 63%). The payout ratio in those years stood at 91.2% and 84.5% respectively.
Maybank’s net profit hit a record high of RM8.2 billion in FY2019 before falling to RM6.48 billion in FY2020 as it booked in significantly higher pre-emptive provisions as a result of the pandemic. In FY2021, its net profit improved to RM8.1 billion, almost back to the level of pre-pandemic FY2019.
But the road ahead for Maybank remains paved with challenges. The rising interest rate environment, while generally good for lenders, may mean slower demand for loans even as some borrowers struggle with repayments. Additionally, there are rising risks of a global recession next year.
In 1HFY2022, Maybank’s net profit fell 10.4% to RM3.9 billion because of an unexpected spike in pre-emptive provisions in the second quarter, mainly in relation to the oil-and-gas and hospitality sectors. Nevertheless, this is seen as a one-off and analysts expect Maybank’s earnings to improve in the second half of the year.
“We are projecting a net profit of RM4.36 billion for Maybank in 2HFY2022 representing a half-on-half growth of 11.7% [and year-on-year growth of 16.4%]. The key drivers would be an expected h-o-h drop in loan loss provisions and a continuous upward trend in net interest margin, amid the upcycle in the overnight policy rate,” says CGS-CIMB Research in an Aug 25 report following the bank’s results. Maybank is also the research firm’s environmental, social and governance (ESG) pick for the sector.
Maybank group president and CEO, Datuk Khairussaleh Ramli, who took over from Datuk Seri Abdul Farid Alias in May this year when the latter chose to step down after almost nine years at the helm, believes the group has emerged even more resilient post-pandemic.
“We will remain disciplined in maintaining our strong liquidity and capital positions, which have given us the ability to navigate through the difficult operating environment,” he said following the announcement of the group’s latest results.
Bloomberg data as at Oct 28 showed that 13 analysts had a “buy” call on the stock while six had a “hold” and two, a “sell”. The average 12-month target price was RM9.59, which suggests further upside for the stock.
Come the first quarter of 2025, Maybank is set to move its corporate head office from the iconic Menara Maybank in Jalan Tun Perak, Kuala Lumpur, to the Menara Merdeka
118 skyscraper, the world’s second-tallest building that is owned by the bank’s largest shareholder Permodalan Nasional Bhd.