Broker: UOB Kay Hian
Date of Report: Wednesday, 27 August 2025

Maybank 2Q25 Earnings Review: Robust Trading Income and Resilient Fundamentals Support Attractive Dividends

Overview: Malaysia’s Largest Banking Group Delivers Steady Results

Malayan Banking Berhad (Maybank), Malaysia’s largest banking group by asset size and a significant regional player with strong exposure in Singapore and Indonesia, delivered its 2Q25 results in line with expectations. The bank’s robust non-interest income, disciplined cost management, and healthy provision buffers underpin its stability in a challenging environment, even as loan growth guidance softens amid external uncertainties.

Stock Snapshot: Key Metrics at a Glance

• Share Price: RM9.75
• Target Price: RM10.52 (Upside: +7.9%)
• Market Cap: RM117,790.8 million (~US\$28.05 billion)
• Dividend Yield: Attractive at 7%
• Major Shareholders:
  • Amanah Saham Nasional – 34.8%
  • Employees Provident Fund – 11.6%
  • Yayasan Perlaburan Bumiputra – 6.4%

2Q25 Performance Review: Trading Income Lifts the Bottom Line

Maybank’s 2Q25 net profit reached RM2.6 billion, rising 4% year-on-year (YoY) and remaining flat quarter-on-quarter (QoQ). The results, representing 51% of full-year forecasts, were supported primarily by:

• Robust trading and investment banking income (+18% YoY, +16% QoQ non-interest income growth)
• Cost discipline with manageable expense growth
• Lower provisions and strong insurance underwriting
• Offsetting factors: Modest net interest margin (NIM) compression and higher pre-emptive credit costs

Maybank’s NIM slipped 3bp QoQ to 2.00% in 2Q25, primarily due to lower SORA rates in Singapore, partially offset by improved asset-liability management in Malaysia. Management anticipates continued NIM pressure in 3Q25 following an Overnight Policy Rate (OPR) cut, but expects a rebound in 4Q25 as deposit costs reprice and proactive liquidity management measures take effect.

Revenue and Profit Highlights: Key Financials Table

Loan Growth, Asset Quality, and Capital Position

Maybank’s loan growth moderated, with 1H25 loans up 4% YoY on constant currency, but only 1.3% in headline terms due to a stronger ringgit. Management trimmed its full-year loan growth guidance to ~3% (from 5–6%) as tariff uncertainties delayed some client investments. Domestic loans, especially mortgages (+11% YoY) and commercial banking (+6%), drove growth, while Indonesian loans were flat.
Asset quality remains resilient:

• Gross Impaired Loan (GIL) ratio: 1.30% in 2Q25 (up from 1.27% in 1Q25); the uptick was mainly due to a single Hong Kong real estate exposure and some SME and auto loan reclassifications, which are not seen as systemic.
• Loan-loss coverage: Healthy at 118%.
• Net credit cost: Edged up 2bp QoQ to 25bp in 2Q25, but 1H25’s 24bp was an improvement from 27bp in 1H24, thanks to strong corporate recoveries. Provisions include RM2 billion in overlays, mainly for consumer and SME portfolios to buffer US tariff risks.

Dividend and Shareholder Returns

Maybank declared a 30 sen interim dividend per share (DPS) in 1H25, translating to a 70% payout ratio. With a strong CET1 ratio of 14.6% and a long runway before full Basel 4 implementation (2030), this payout is considered sustainable. The yield remains attractive at ~7%, providing a solid buffer for investors.

Management Guidance and 2025 Outlook

Key guidance for 2025 includes:

• Return on Equity (ROE): 11.3%
• Loan growth: 3%
• Net credit cost: below 30bp
• Cost-to-income ratio: below 49%

Management expects the recent uptick in GIL to have stabilised, supported by corrective measures for affected portfolios. The RM2 billion overlays are deemed adequate to buffer against unforeseen asset quality shocks, with overall outlook remaining stable despite external geopolitical risks.

Valuation Snapshot and Key Financial Ratios

The stock is trading at its historical mean Price-to-Book (P/B), which is seen as fair given modest earnings growth expectations but strong provision buffers and dividend yield. The recommendation remains HOLD, with a target price of RM10.52, based on 1.18x 2026F P/B and 10.5% ROE.

Environmental, Social, and Governance (ESG) Commitments

Maybank continues to advance its ESG agenda:

• Environmental: Commitment to provide RM50 billion in sustainable financing by 2025 and zero new coal financing, with a goal to transition all stakeholders to zero carbon emissions by 2050.
• Social: Maintains 25% female directors on the Board, 40% female senior management, and expands financial inclusion for B40 communities, including affordable housing and welfare assistance.
• Governance: Independent directors make up 75% of the Board.

Balance Sheet and Capital Strength

Maybank’s balance sheet remains strong, with prudent liquidity and capital management. Key indicators include a Tier-1 CAR of 18.0% (2025F), total assets exceeding RM1 trillion, and customer deposits expected to grow steadily.

Conclusion: Stable Outlook with Defensive Qualities and Strong Yields

Maybank’s 2Q25 results reinforce its position as a defensive, income-yielding play in the Malaysian banking sector. While earnings growth is modest and NIM faces short-term pressure, management’s prudent approach to capital, asset quality, and cost discipline underpins stability. The 7% dividend yield stands out as a key attraction for shareholders, while initiatives in ESG and digitalisation provide additional longer-term support. The HOLD recommendation reflects a fair risk-reward at current valuations, with upside potential as macro conditions stabilise and trading income remains healthy.