UOB Kay Hian
Date of Report: 27 August 2025
Maybank Delivers Stable 2Q25: Robust Trading Income Drives Performance Amid NIM Headwinds

Overview: Malaysia’s Banking Giant Shows Resilience in 2Q25

Malayan Banking Berhad (Maybank), the nation’s largest lender by asset size and a key regional banking group with significant exposure in Singapore and Indonesia, has posted a steady set of results for the second quarter of 2025. The bank’s performance was supported by robust growth in non-interest income, prudent cost management, and a sustainable dividend yield, even as net interest margin (NIM) faced slight compression. UOB Kay Hian maintains a HOLD rating on Maybank with a target price of RM10.52, reflecting a balanced risk-reward profile and an attractive 7% dividend yield.

Key Highlights at a Glance

• 2Q25 net profit: RM2.63 billion (+4% YoY, flat QoQ)
• 1H25 net profit: RM5.22 billion (+4% YoY), representing 51% of full-year forecasts
• Dividend: 30 sen interim DPS (approx. 70% payout, 7% yield)
• NIM: 2.00% in 2Q25 (-3bps QoQ), expected slight full-year compression
• Loan growth guidance trimmed: Now ~3% for FY25 (from 5–6%)
• Cost/income ratio: 49.3% in 2Q25
• Gross impaired loans (GIL): Ratio up to 1.30%, but well-provided for
• Credit cost: Stable at 25 bps in 2Q25

Share Performance and Valuation Snapshot

Maybank’s share price closed at RM9.75, with a target price of RM10.52, implying a modest upside of 7.9%. The stock is trading near its historical mean price-to-book (P/B) multiple, reflecting fair value given current earnings growth expectations and robust provision buffers.

Results Review: Strong Non-Interest Income Offsets NIM Pressure

Maybank’s earnings momentum in 2Q25 was driven primarily by resilient non-interest income, which surged 18% year-on-year, fueled by strong trading and investment banking gains. This helped offset a 6bp compression in NIM, largely due to lower SORA rates in Singapore and a 2bp rise in credit cost.

Net Interest Margin and Loan Growth: Facing the Pressure

Maybank’s NIM slipped 3 bps quarter-on-quarter to 2.00% in 2Q25, mainly due to lower SORA rates in Singapore.
Management anticipates further NIM pressure in 3Q25 from an Overnight Policy Rate (OPR) cut, with some recovery expected in 4Q25 as deposits reprice.
Proactive liquidity management—optimizing loan-to-deposit ratio (LDR), releasing expensive fixed deposits, and shifting to cheaper bond funding—should cushion the impact.
Full-year NIM is forecast to compress by 3 bps, in line with management’s updated guidance.
Loan growth guidance for FY25 has been trimmed to ~3% (from 5–6%) due to tariff uncertainties and delayed client investments. Domestic loan growth remains robust, driven by mortgages (+11% YoY) and commercial banking (+6% YoY). Indonesia was flat.

Asset Quality: Well-Buffered Against Risks

Gross Impaired Loan (GIL) ratio increased to 1.30% in 2Q25 (from 1.27% in 1Q25), mainly due to a single Hong Kong real estate loan (fully provided for) and some domestic SME and auto loan reclassifications.
Management considers these to be isolated, not systemic, and notes improved recoveries in July.
Loan-loss coverage remains strong at 118%, with credit cost stable at 25bps in 2Q25 (1H25: 24bps).
Additional pre-emptive provisions have lifted the Management Overlay Account (MOA) to RM2 billion, mainly for consumer and SME portfolios to buffer against potential US tariff risks.

Dividend Attractiveness and Capital Position

Maybank declared a 30 sen interim dividend for 1H25, representing a 70% payout ratio.
The bank’s Common Equity Tier-1 (CET1) ratio stands at a robust 14.6%, providing ample room for continued high payout as Basel 4 adoption is only due by 2030.
The current dividend yield is an attractive 7%, supporting downside for the share price.

Management Guidance and Outlook for 2025

ROE target: 11.3%
Loan growth: 3%
Net credit cost: Below 30bps
Cost-to-income ratio: Less than 49%
Management expects the uptick in GIL to have stabilized with corrective measures now in place. Sufficient provision overlays should buffer against unforeseen asset quality shocks.

Key Financial Ratios and Metrics

Balance Sheet Strength and Capital Adequacy

Maybank’s total assets are forecast to grow from RM1.03 trillion in 2024 to RM1.20 trillion by 2027.
Customer loans are projected to rise from RM628.9 billion in 2024 to RM735.3 billion in 2027.
Tier-1 Capital Adequacy Ratio (CAR) is expected to remain robust, improving from 16.1% in 2024 to 18.0% in 2025 before stabilizing above 17% in subsequent years.
Loan loss coverage is set to strengthen further from 122.4% in 2024 to more than 140% by 2027.

Environmental, Social, and Governance (ESG) Commitments

• Environmental: RM50 billion green financing commitment by 2025; zero new coal financing; transition to net zero by 2050
• Social: 25% female board directors, 40% females in senior management; enhanced financial inclusion for B40 communities via affordable housing and welfare assistance
• Governance: 75% independent directors on the board

Valuation and Recommendation

UOB Kay Hian maintains a HOLD rating with a target price of RM10.52 (1.18x 2026F P/B, 10.5% ROE). The stock’s current valuation at its historical mean P/B is considered fair, reflecting stable ROE and strong provision buffers. The 7% dividend yield offers attractive downside support for investors seeking income in a low-growth environment.

Conclusion: A Defensive Play with Resilient Income and Solid Capital Buffers

Maybank’s 2Q25 performance underscores the strength of its diversified income streams and disciplined capital management. While loan growth is expected to moderate and NIM will likely face further pressure in the near term, robust trading income, prudent provisioning, and a sustainable high dividend yield continue to make Maybank a defensive choice for investors seeking stability in Malaysia’s banking sector. The group’s ESG initiatives and strong capital position further enhance its long-term investment case.