Maybank_1qfy10-20091113-making A Whole Lot Of Cents

1QFY10 RESULTS

CIMB Research Report

Malayan Banking Bhd Making a whole lot of cents

NEUTRAL

Maintained

RM6.84

Target: RM7.70

MALAYSIA

13 November 2009

Mkt.Cap: RM48,343m/US$14,293m Banks

MAY MK / MBBM.KL

Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Above expectations. Maybank’s 1QFY6/10 net profit jumped 54.1% yoy to

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RM881.8m, accounting for 28% of our full-year forecast and 31% of consensus. The main source of the variance was a strong topline which benefited from robust growth of non-interest income and margin expansion. We are raising FY10-12 net earnings forecasts by 2-8% for lower NPL ratios and higher non-interest income. This increases our target price from RM7.55 to RM7.70 which we continue to peg to 5% premium over the DDM value. Despite the positive earnings outlook, we remain NEUTRAL on Maybank as we believe the positives are already in the price given its above-average CY10 P/E of 13.4x (vs. sector’s 11.4x). We prefer Public Bank (PBK MK, Outperform) for a play on big-cap Malaysian banks. Topline catalysts. 1Q net earnings were primarily driven by a 54.1% yoy jump in operating revenue. Net interest income advanced 28.7% yoy, fuelled by a 34bp expansion in net interest margin to 2.4%. Also, non-interest income surged 130.7% yoy, buoyed by higher fee income, realised investment income and foreign exchange gains. Slower loan momentum. The group recorded 4% yoy loan growth in Sep 09, slower than the 13% yoy growth recorded three months ago. This was mainly due to a 1.4% slippage of overseas loans. Domestic loan momentum improved slightly from 6.5% yoy in Jun 09 to 6.8% yoy in Sep 09 (vs. 7.2% for the industry). The pace of property loans picked up in Sep 09 but working capital loans slipped 1.8% yoy (-0.5% yoy in Jun 09). Despite the weaker loan growth in 1Q, we believe that our full-year forecast of 8.1% is achievable as we expect a pick-up in loan growth in Indonesia and residential mortgages and SME loans in the domestic market. Improving NPL ratio. The group’s net NPL ratio improved slightly to 1.6% in Sep 09 from 1.64% in Jun 09 while loan loss coverage was stable at 113%. Upping earnings forecasts and target price. The absence of a dividend in 1Q is within our expectations. We are raising our FY10-12 net earnings forecasts by 28% as we (1) lower the projected net NPL ratio from 2.2-2.7% to 1.7-1.9% and (2) increase our non-interest income forecasts by 1-3%. This lifts our target price from RM7.55 to RM7.70, still pegged to a 5% premium over its DDM value (cost of equity of 13.2% and dividend growth rates of 12.6% for the interim growth phase and 6% for the long-term growth phase).

Results comparison FYE Jun (RM m) Net interest income Non-interest income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates and others Pretax profit Tax Tax rate (%) Minority interests Net profit Core net profit EPS (sen) Core EPS (sen)

1QFY10

1QFY09

1,627.6 1,265.0 1,523.6 780.2 3,151.2 2,045.2 (1,570.7) (1,226.5) 1,580.5 818.7 (417.7) (185.4) (6.5) 248.5 1,156.3 881.8 (249.5) (311.0) 21.6 35.3 (25.0) 1.4 881.8 572.2 881.8 541.2 12.5 11.7 12.5 11.1

yoy % chg 28.7 95.3 54.1 28.1 93.0 125.3 (102.6) 31.1 (19.8)

4QFY09

1,563.6 1,735.3 3,298.9 (1,524.4) 1,774.5 (782.5) (1,813.7) (821.7) (241.9) (29.4) (54.5) (1,885.7) 54.1 (1,118.1) 612.4 62.9 6.3 (17.9) 11.8 9.8

qoq % chg 4.1 (12.2) (4.5) 3.0 (10.9) (46.6) (99.6) 240.7 3.1 (54.1) 178.9 44.0 169.7 27.3

Prev. FY10F 6,147.9 5,621.1 11,769.0 (5,918.8) 5,850.3 (1,473.3) 180.8 4,557.8 (1,364.0) 29.9 (72.7) 3,121.0 3,121.0 44.0 44.0

Comments Above. Driven by margin expansion from BII. Above. Higher investment and FX income. Above. Strong growth in net and non-int. Above. Consolidation of BII. Above. Strong growth in revenue. Above. Higher SP charges. Below. Dragged by impairment losses. In line. Growth supported by higher revenue. Below. Lower effective tax rate. Below Tax credit at BII. Above. Higher subsidiary contributions. Above. 28% of our est and 31% of mkt.

Source: Company, CIMB Research

Please read carefully the important disclosures at the end of this publication.

Financial summary

Price chart 7.3

2.50

6.8

2.00

6.3 5.8

1.50

5.3

1.00

4.8 4.3

0.50 3.8 3.3 Nov-08

0.00 Apr-09 Volume 10m (R.H.Scale)

Sep-09 Malayan Banking Bhd

Source: Bloomberg

FYE Jun Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus

2008 5,426.8 4,136.4 9,563.2 (810.1) 4,086.0 2,928.1 54.1 (9%) 12.6 59.7 9% 11.4 44.0 6.4% 1.9 15.2%

2009 5,919.5 4,599.5 10,519.0 (1,698.8) 1,674.2 691.9 11.1 (80%) 61.7 34.9 (42%) 19.6 8.0 1.2% 1.9 3.1%

2010F 6,176.7 3,977.4 11,916.9 (1,281.5) 4,897.4 3,369.6 47.5 329% 14.4 47.6 36% 14.4 31.5 4.6% 1.8 12.8% 8.0% 1.17

2011F 6,845.6 4,221.1 12,988.8 (1,212.5) 5,521.6 3,848.8 54.3 14% 12.6 54.3 14% 12.6 43.1 6.3% 1.6 13.4% 4.2% 1.14

2012F 7,579.7 4,577.9 14,238.5 (1,056.0) 6,375.2 4,458.3 62.9 16% 10.9 62.9 16% 10.9 50.3 7.4% 1.5 14.4% 1.6% 1.10

Source: Company, CIMB Research, Bloomberg

Conference call highlights The information provided during yesterday’s teleconference was broadly in line with our expectations and management’s previous guidance. Management remained optimistic about the group’s earnings prospects, especially as 1Q performance trumped the group’s full-year targets – 1Q ROE was 13.9% vs. 11% target for FY10 and revenue growth was 54.1% vs. a target of 8%. FY10 earnings will be underpinned by management’s expectations of GDP growth of 4.5% for 2010 (vs. 3.5% projected by our economic research team) and a stable interest-rate environment.

Review of overseas operations 9% rise in Singapore earnings. Maybank’s Singapore operations registered a 9% yoy increase in 1QFY6/10 pretax profit to RM198.1m, mainly due to lower marked-tomarket losses of RM5m compared to RM17.4m a year ago. The unit boasts strong asset quality with net NPL ratio at only 0.1% in Sep 09, down from 0.16% in Jun 09. Strong rebound for BII. Maybank’s key Indonesian subsidiary, Bank Internasional Indonesia (BII) racked up a net profit of RM47.4m in the quarter ended Sep 09, reversing from a net loss of RM31.1m in the preceding quarter. Earnings for the quarter were driven by (1) a 56.9% qoq drop in loan loss provisioning to RM90m, and (2) a 3.6% qoq expansion in net interest income, thanks to a 0.7% qoq uptick in net interest margin to 6.9%. Overheads were stable at RM277m but non-interest income slid 8.6% qoq to RM157m. Flattish bottom line for MCB Bank. MCB Bank’s net profit for the quarter, however, was flattish at RM22.9m because of the drag from a (1) 127.2% yoy jump in provisions due to higher loss in the value of investments, and (2) 14.4% slide in non-interest income resulting from lower dividend income, forex income and capital gains on investments. This offset the strong 31.1% growth in net interest income, which was aided by an increase in yields and earnings assets. MCB Bank’s ROE remained strong at 25% in the quarter, albeit lower than the 29% recorded a year ago. Figure 1: Sector comparisons

Malayan Banking Affin Alliance AMMB Hldgs EON Capital Hong Leong Bank Public Bank Public Bank-F RHB Cap Simple average

Bloomberg ticker MAY MK AHB MK AFG MK AMM MK EON MK HLBK MK PBK MK PBKF MK RHBC MK

Recom. N O N O O U O O O

Price (Local) 6.84 2.29 2.60 5.06 5.79 8.30 10.96 10.96 5.42

Target price Mkt cap (Local) (US$ m) 7.70 14,293 2.59 994 2.95 1,195 6.30 4,447 6.72 1,181 7.50 3,840 15.00 11,445 15.00 11,466 7.00 3,451

O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research

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Core P/E (x) CY2009 CY2010 16.5 13.4 10.8 8.8 15.9 11.3 14.8 13.5 10.9 8.3 13.9 13.0 15.3 12.1 15.4 12.1 11.9 10.3 13.9 11.4

3-yr EPS CAGR (%) 21.7 16.5 24.1 17.0 58.3 7.4 13.1 13.1 7.4 19.8

P/BV (x) CY2009 1.8 0.7 1.4 1.6 1.1 2.2 3.6 3.6 1.4 1.9

ROE (%) CY2009 8.4 6.9 9.1 11.5 10.8 16.6 25.2 25.2 12.1 14.0

Div yield (%) CY2009 2.9 3.1 1.9 2.1 2.8 6.0 6.9 6.9 3.4 4.0

Figure 2: Quarterly profit & loss statement FYE June (RM m)

Mar-08 3QFY08

Jun-08 4QFY08

Sep-08 1QFY09

Dec-08 2QFY09

Mar-09 3QFY09

Jun-09 4QFY09

Sep-09 1QFY10

Interest in come Interest expense Net interest income Non-interest income Islamic banking income (IBI) Total income Overhead expenses Pre-provision profit Loan loss provisions (LLP) Associates' contrib and others Others Exceptional items Pretax profit Tax Tax rate (%) Minority interests Net profit

2,754.7 (1,405.1) 1,349.6 617.9 267.8 2,235.3 (1,065.4) 1,169.9 (166.3) 16.4 0.0 0.0 1,020.0 (252.6) 24.8 (8.8) 758.6

2,601.8 (1,250.8) 1,351.0 1,296.8 273.1 2,920.9 (1,124.7) 1,796.2 (353.6) (423.9) 0.0 0.0 1,018.7 (262.0) 25.7 (53.5) 703.2

2,571.9 (1,306.9) 1,265.0 495.0 285.2 2,045.2 (1,226.5) 818.7 (185.4) 248.5 0.0 0.0 881.8 (311.0) 35.3 1.4 572.2

3,489.8 (1,942.4) 1,547.4 809.6 301.7 2,658.7 (1,408.5) 1,250.2 (312.2) 22.3 0.0 0.0 960.3 (225.6) 23.5 (0.1) 734.6

3,196.2 (1,652.7) 1,543.5 629.8 323.5 2,496.8 (1,409.8) 1,087.0 (411.9) (21.2) 0.0 0.0 653.9 (145.0) 22.2 (5.6) 503.3

2,779.8 (1,216.2) 1,563.6 1,418.1 317.2 3,298.9 (1,524.4) 1,774.5 (782.5) (1,813.7) 0.0 0.0 (821.7) (241.9) (29.4) (54.5) (1,118.1)

2,728.2 (1,100.6) 1,627.6 1,142.0 381.6 3,151.2 (1,570.8) 1,580.4 (417.7) (6.5) 0.0 0.0 1,156.2 (249.5) 21.6 (24.9) 881.8

yoy growth (%) Interest in come Interest expense Net interest income Non-interest income Islamic banking income (IBI) Total income Overhead expenses Pre-provision profit Loan loss provisions (LLP) Pretax profit Tax Minority interests Net profit

2.4% 0.5% 4.4% -9.2% 41.6% 3.3% 13.8% -4.7% -14.7% -0.8% -2.0% 51.7% -0.8%

-10.4% -22.1% 4.0% 49.4% 39.6% 23.6% 14.9% 29.8% 655.6% -23.5% -0.5% 252.0% -33.2%

-11.6% -18.3% -3.6% -18.9% 36.1% -4.0% 21.5% -27.1% 71.5% -13.0% 18.6% -108.5% -22.2%

16.5% 23.0% 9.4% 27.2% 40.8% 17.4% 33.6% 3.2% 75.8% -7.1% -26.5% -102.1% 0.5%

16.0% 17.6% 14.4% 1.9% 20.8% 11.7% 32.3% -7.1% 147.7% -35.9% -42.6% -36.4% -33.7%

6.8% -2.8% 15.7% 9.4% 16.1% 12.9% 35.5% -1.2% 121.3% -180.7% -7.7% 1.9% -259.0%

6.1% -15.8% 28.7% 130.7% 33.8% 54.1% 28.1% 93.0% 125.3% 31.1% -19.8% -1878.6% 54.1%

Key ratios (%) Annualised ROE Annualised ROA Annualised net interest margin Annualised non-interest income ratio IBI over total revenue Cost-to-income ratio LLP over gross interest income

15.6% 1.2% 2.39% 27.6% 12.0% 47.7% 6.0%

14.6% 1.1% 2.31% 44.4% 9.3% 38.5% 13.6%

11.5% 0.8% 2.05% 24.2% 13.9% 60.0% 7.2%

14.8% 1.0% 2.48% 30.5% 11.3% 53.0% 8.9%

10.0% 0.7% 2.46% 25.2% 13.0% 56.5% 12.9%

-20.2% -1.5% 2.45% 43.0% 9.6% 46.2% 28.1%

15.4% 1.1% 2.39% 36.2% 12.1% 49.8% 15.3%

Source: Company

1Q results comments 1QFY10 net profit jumped 54.1% yoy to RM881.8m, partly due to the consolidation of its subsidiary in Indonesia, Bank Internasional Indonesia (BII), which recorded a net profit of RM47.4m in the quarter. This helped operating revenue surge 54.1% yoy to RM3.15bn, faster than the 28.1% expansion in overheads. Consolidation of BII also helped the group to achieve a 34bp expansion in net interest margin to 2.4%, spurring net interest income 28.1% yoy higher to RM1.63bn. 1Q non-interest income jumped 130.7% yoy to RM1.14bn, buoyed by (1) a 35.7% rise in fee-based income, (2) realised investment gains of RM92.7m vs. a net loss of RM0.2m a year ago, and (3) foreign exchange gains of RM107.7m, a reversal from a loss of RM125.2m in 1QFY09. Even if we were to exclude BII, the group’s non-interest income would also have doubled. Due to the consolidation of BII, the group’s overheads also increased 28.1% yoy to RM1.57bn in 1QFY10 due to hikes in personnel costs (+20.9% yoy), establishment costs (+45.7%) and administrative expenses (+55.8%). Excluding BII, Maybank’s overheads would have increased by only 5.5% yoy. Meanwhile, loan loss provisioning shot up 125.3% yoy to RM417.7m, primarily lifted by a 94.2% jump in specific provision charges.

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Figure 3: Quarterly balance sheet Balance Sheet (RM'm)

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Cash and short-term funds Deposits with other FI's Securities purchased under resale agreement Securities held-for-trading Securities available-for-sale (Dealing securities) Securities held-to-maturity (Investment securities) Loans,advances and financing Other assets Intangible assets Statutory deposits Investment in associates Property and equipment Deferred tax assets Life , general takaful fund TOTAL ASSETS

33,771.3 10,741.5 31.3 1,949.7 32,902.2 1,024.7 151,596.9 4,526.4 196.5 4,656.5 44.5 1,191.4 893.8 15,349.4 258,876.1

27,644.4 8,956.5 0.0 880.8 34,484.1 1,186.2 164,614.2 4,935.3 189.7 5,872.4 2,218.8 1,210.8 1,217.5 15,690.0 269,100.7

27,435.6 6,829.3 30.3 2,210.7 43,055.5 1,215.6 184,299.8 7,349.0 3,147.7 6,807.1 3,031.3 1,529.0 1,299.2 16,157.6 304,397.7

22,734.6 4,145.8 0.0 2,367.6 47,828.5 1,867.0 182,575.4 6,835.0 6,207.1 5,405.2 3,041.5 1,477.6 1,122.3 16,098.7 301,706.3

23,368.1 6,778.1 268.1 1,539.2 47,780.3 4,417.4 185,938.7 6,801.5 6,256.1 3,488.7 3,054.6 1,481.2 1,300.6 16,296.5 308,769.1

23,608.0 6,299.2 346.5 1,489.3 47,877.1 8,360.8 185,783.1 6,249.6 4,374.0 4,050.9 2,630.1 1,395.5 1,493.1 16,781.9 310,739.1

24,232.0 7,486.4 77.7 2,526.4 46,061.7 8,484.3 190,907.4 6,567.7 4,561.8 4,044.3 2,660.1 1,383.6 1,430.1 16,617.1 317,040.6

Deposits from customers Deposits from other FI's Oblig atio ns on repurchase agreement securities Bill and acceptances payable Other li abilities Recourse obligations to lo ans sold to Cagamas Provision for taxation and zakat Deferred tax liabil it ies Subordinated obligations Life , general takaful fund li abilities Life , general takaful fund TOTAL LIABILITIES

185,202.4 21,453.1 114.3 3,142.3 6,269.7 1,369.6 525.1 64.7 4,953.1 3,997.0 11,352.4 238,443.7

187,112.1 23,136.9 322.4 4,792.3 6,303.7 1,274.1 435.5 51.9 9,890.2 4,032.8 11,657.1 249,009.0

204,946.3 32,707.2 879.0 5,486.3 9,629.0 820.5 399.6 52.3 11,611.3 4,061.0 12,096.6 282,689.1

206,592.9 29,154.6 0.0 3,712.4 9,349.9 759.8 232.8 49.5 14,679.8 4,000.2 12,098.4 280,630.3

211,724.2 30,906.3 0.0 2,634.9 9,132.0 291.1 199.0 52.0 16,100.5 4,009.5 12,287.0 287,336.5

212,598.6 28,781.9 0.0 1,470.1 8,445.1 516.3 87.7 57.4 16,232.2 4,530.0 12,251.9 284,971.2

218,764.6 26,444.6 178.0 1,449.1 9,288.1 491.1 109.1 49.1 16,813.9 4,426.1 12,191.0 290,204.7

Share capital Reserves SHF Minority Interest TOTAL LIABILITIES AND SHF

4,881.0 14,870.1 19,751.1 681.3 258,876.1

4,881.1 14,421.4 19,302.5 789.3 269,100.8

4,881.1 15,056.1 19,937.2 1,771.3 304,397.6

4,881.1 15,348.0 20,229.1 846.9 301,706.3

4,881.2 15,700.5 20,581.7 850.8 308,769.0

7,077.7 17,821.1 24,898.8 869.2 310,739.2

7,078.0 18,881.1 25,959.1 876.8 317,040.6

Interest earnin gs assets Interest-paying liabilitie s

232,017.6 214,865.2

237,766.2 225,253.9

265,076.8 255,630.1

261,518.9 254,139.7

270,089.9 261,365.9

273,764.0 259,082.8

279,775.9 263,650.2

81.9%

88.0%

89.9%

88.4%

87.8%

87.4%

87.3%

Loan to deposit ratio Source: Company

Total deposits advanced by 6.7% yoy to RM218.8bn in Sep 09, faster than the 3.6% yoy expansion in net loans to RM190.9bn. Consequently, the loan-to-deposit ratio declined from 89.9% a year ago to 87.3% in Sep 09, higher than the industry’s 78.9%.

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Figure 4-1: Breakdown of domestic loans Loans (RM 'm) (FYE Jun)

4Q08

Sectorial breakdown of loans in Malaysia Construction 5,456.5 Residential mortgages 23,907.1 Non-residentia l mortgages 6,429.5 Purchase of securities 10,336.7 Auto loans 17,182.1 Purchase of fixed assets 3.8 Personal use 3,326.4 Credit card 3,196.1 Purchase of consumer durables 12.3 Working capital 51,271.9 Others 943.5 TOTAL 122,065.9

1Q09

2Q09

3Q09

4Q09

1Q10

5,313.9 24,134.2 6,382.1 10,358.9 17,919.0 3.5 3,383.7 3,318.2 14.3 52,954.9 859.3 124,642.0

5,541.4 24,254.5 6,493.6 10,384.3 18,082.1 3.3 3,443.7 3,570.4 16.0 50,838.7 3,317.4 125,945.4

5,866.5 24,242.8 6,518.5 10,492.0 18,796.6 3.3 3,528.5 3,570.7 16.1 52,901.4 3,440.8 129,377.2

6,300.2 24,334.4 6,493.3 11,437.5 19,576.0 3.3 3,782.8 3,556.9 15.7 51,005.7 3,438.5 129,944.3

6,456.8 24,948.6 6,610.5 11,835.7 20,135.3 3.3 4,000.2 3,651.5 17.0 52,011.9 3,439.8 133,110.6

Sectorial breakdown of loans (%) (domestic loans) Construction 4.5% Residential mortgages 19.6% Non-residentia l mortgages 5.3% Purchase of securities 8.5% Auto loans 14.1% Purchase of fixed assets 0.0% Personal use 2.7% Credit card 2.6% Purchase of consumer durables 0.0% Working capital 42.0% Others 0.8% TOTAL 100.0% As % of total loans 71.3%

4.3% 19.4% 5.1% 8.3% 14.4% 0.0% 2.7% 2.7% 0.0% 42.5% 0.7% 100.0% 65.2%

4.4% 19.3% 5.2% 8.2% 14.4% 0.0% 2.7% 2.8% 0.0% 40.4% 2.6% 100.0% 66.5%

4.5% 18.7% 5.0% 8.1% 14.5% 0.0% 2.7% 2.8% 0.0% 40.9% 2.7% 100.0% 67.1%

4.8% 18.7% 5.0% 8.8% 15.1% 0.0% 2.9% 2.7% 0.0% 39.3% 2.6% 100.0% 67.2%

4.9% 18.7% 5.0% 8.9% 15.1% 0.0% 3.0% 2.7% 0.0% 39.1% 2.6% 100.0% 67.0%

y-o-y growth rate Construction Residential mortgages Non-residentia l mortgages Purchase of securities Auto loans Purchase of fixed assets Personal use Credit card Purchase of consumer durables Working capital Others TOTAL

-1.4% -1.2% 2.4% 6.2% 30.2% 66.7% 5.4% 20.9% -81.0% 23.0% -33.6% 13.4%

5.6% -0.8% 2.4% 5.3% 28.5% -38.9% 5.2% 21.0% -4.8% 14.5% 89.2% 12.1%

6.9% 0.8% 1.5% 4.2% 26.6% -26.7% 6.9% 21.0% -31.2% 17.3% 103.3% 13.6%

15.5% 1.8% 1.0% 10.6% 13.9% -13.2% 13.7% 11.3% 27.6% -0.5% 264.4% 6.5%

21.5% 3.4% 3.6% 14.3% 12.4% -5.7% 18.2% 10.0% 18.9% -1.8% 300.3% 6.8%

-1.6% -1.3% 2.0% 10.7% 31.4% 11.8% 6.0% 21.4% -75.5% 18.3% -24.5% 12.1%

Source: Company

Domestic loan growth improved slightly from 6.5% yoy in Jun 09 to 6.8% yoy in Sep 09. But the rate was lower than the 12-14% registered between Jun 08 and Mar 09. We are positive about the improved momentum for property loans – the pace for residential and non-residential mortgages strengthened from 1-2% yoy in Jun 09 to 34% yoy in Sep 09. Growth of construction loans also accelerated from 15.5% to 21.5% in the same period. However, a few loan segments show moderating trends, including auto loans (from +13.9% yoy in Jun 09 to +12.4% yoy in Sep 09), working capital loans (from -0.5% to -1.8%) and credit card receivables (from +11.3% to +10%).

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Figure 4-2: Breakdown of overseas loans Overseas Operations: Singapore Labuan Offshore USA UK Hong Kong Brunei Vietnam Cambodia Papau New Guinea Philippines Indonesia Bahrain China TOTAL GRAND TOTAL

4Q08 36,976.7 3,803.6 1,230.6 1,291.9 2,725.8 155.3 547.2 174.8 49.4 766.2 196.8 371.9 799.4 49,089.6 171,155.5

Breakdown of loans (%) over total loans Singapore 21.6% Labuan Offshore 2.2% USA 0.7% UK 0.8% Hong Kong 1.6% Brunei 0.1% Vietnam 0.3% Cambodia 0.1% Papau New Guinea 0.0% Philippines 0.4% Indonesia 0.1% Bahrain 0.2% China 0.5% TOTAL 28.7% y-o-y growth of overseas loans Singapore Labuan Offshore USA UK Hong Kong Brunei Vietnam Cambodia Papau New Guinea Philippines Indonesia Bahrain China TOTAL

31.9% -0.3% 1.0% 49.1% 25.3% -4.8% 39.8% 67.8% 66.3% 12.3% 124.1% 15.1% 14.8% 27.2%

1Q09 38,369.4 4,064.2 1,339.0 1,324.1 2,971.9 120.2 626.9 216.8 54.4 831.7 15,418.4 412.4 831.9 66,581.3 191,223.3

2Q09 38,508.3 3,713.5 1,477.2 1,238.3 3,005.1 121.6 577.2 241.0 67.8 891.9 12,363.6 420.5 815.5 63,441.5 189,386.9

3Q09 38,843.0 3,601.3 1,452.9 1,309.3 3,132.4 127.8 561.5 256.2 64.9 903.8 11,955.7 439.8 851.5 63,500.1 192,877.3

4Q09 39,269.7 3,127.6 1,339.2 1,281.0 2,892.4 130.6 548.0 302.5 66.4 793.5 12,417.7 280.6 969.3 63,418.5 193,362.8

1Q10 40,854.1 3,204.1 1,279.7 1,244.7 2,856.5 147.4 585.5 266.7 66.5 771.9 13,270.8 268.8 855.9 65,672.6 198,783.2

20.1% 2.1% 0.7% 0.7% 1.6% 0.1% 0.3% 0.1% 0.0% 0.4% 8.1% 0.2% 0.4% 34.8%

20.3% 2.0% 0.8% 0.7% 1.6% 0.1% 0.3% 0.1% 0.0% 0.5% 6.5% 0.2% 0.4% 33.5%

20.1% 1.9% 0.8% 0.7% 1.6% 0.1% 0.3% 0.1% 0.0% 0.5% 6.2% 0.2% 0.4% 32.9%

20.3% 1.6% 0.7% 0.7% 1.5% 0.1% 0.3% 0.2% 0.0% 0.4% 6.4% 0.1% 0.5% 32.8%

20.6% 1.6% 0.6% 0.6% 1.4% 0.1% 0.3% 0.1% 0.0% 0.4% 6.7% 0.1% 0.4% 33.0%

26.9% 10.0% 9.8% 33.5% 29.8% -23.2% 56.2% 124.0% 92.9% 17.5% 15994.4% 13.9% 9.7% 62.3%

19.9% 7.5% 32.0% 12.1% 21.4% -24.6% 34.3% 125.9% 85.2% 15.1% 10754.8% 28.3% 11.8% 47.7%

16.9% 9.0% 15.8% 3.2% 21.3% -19.1% 29.9% 112.1% 33.5% 20.4% 15326.7% 21.6% 11.3% 43.2%

6.2% -17.8% 8.8% -0.8% 6.1% -15.9% 0.1% 73.1% 34.4% 3.6% 6209.8% -24.5% 21.3% 29.2%

6.5% -21.2% -4.4% -6.0% -3.9% 22.6% -6.6% 23.0% 22.2% -7.2% -13.9% -34.8% 2.9% -1.4%

Source: Company

Although Maybank’s overseas loan base advanced 3.6% qoq, it shrank 1.4% on yoy basis to RM65.7bn as at end-Sep 09. The main drag was the 21.2 % yoy drop in Labuan, without which overseas loans would have been virtually unchanged yoy. Loans in Singapore, which accounted for the largest share (62.2%) of overseas loans expanded 6.5% yoy in Sep 09 (vs. 6.2% yoy in Jun 09) while loans for the second largest foreign operations, i.e. Indonesia (about 20.2% of overseas loans) dropped 13.9% yoy. However, the Indonesian loan base has been recovering qoq, expanding 4-7% qoq in the past two quarters. Overall, overseas loans accounted for 33% of the group’s total loans in Sep 09, down from 34.8% a year ago.

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OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.

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RECOMMENDATION FRAMEWORK #2 ** STOCK RECOMMENDATIONS

SECTOR RECOMMENDATIONS

OUTPERFORM: Expected positive total returns of 15% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 12 months.

NEUTRAL: Expected total returns of between -15% and +15% over the next 12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months.

UNDERPERFORM: Expected negative total returns of 15% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 12 months.

TRADING BUY: Expected positive total returns of 15% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 3 months.

TRADING SELL: Expected negative total returns of 15% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

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