Catalysts for positive surprise in 2H13 not on Maybank's horizon

Blame it on macro headwinds in Malaysia and Indonesia.

According to CLSA, Maybank has been the best performing large cap Malaysian bank on a year-to-date basis.

The analyst's reference for Maybank had been driven by our more favourable view of profitability trends in 13CL. However Maybank has started an earnings downgrade cycle with cuts on the back of both 1Q13 and 2Q13 results.

Here's more from CLSA:

Given the macro headwinds in Malaysia and Indo, the lacklustre performance in Maybank Singapore and pressure on the cost line, we struggle to see the catalysts for positive surprise in 2H13.

As of 1H13, Maybank was tracking below its 13CL KPIs - 15% ROE and 12% loan growth. Maybank’s management team and its board remain confident that these targets can be achieved - driven by Malaysia (Economic Transformation Program) and momentum in Indonesia.

Given the economic and political headwinds in Malaysia and Indonesia, the lacklustre performance in Maybank Singapore and pressure on the cost line, we struggle to see the catalysts for positive surprise in 2H13 that would cause the bank to hit its 13CL targets.

In our view, there is more risk of the EPS downgrade cycle continuing as opposed to ending in 2Q13.

We also cannot ignore some strategic uncertainty in the wake of a new CEO. Following Datuk Abdul Farid Alias’ appointment, the focus has been on retaining the core of Maybank’s strategy but also having the courage to make bold decisions in order to advance the group’s ambitions regionally.

By product, Farid is keen to expand in retail, community finance, insurance and asset management. By geography, there is interest in rounding out the bank’s existing investment banking presence in Thailand.

We are hopeful that Maybank has learned from its past and that any expansion plans will be carried out with shareholder’s best interests in mind. Further management changes are possible on the back of Farid’s appointment. We will need to watch these developments closely.

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