PETALING JAYA: Analysts have lauded Malayan Banking Bhd’s (Maybank) digital initiatives, which they opined will contribute positively to its earnings.
“We believe that targeting millennials makes strategic sense given this age group’s prevalence in digital usage. We are pleasantly surprised by the group’s direction to create an in-house research and development (R&D) team and we believe that this will ensure its digital offerings are robust,” said MIDF Research, which is maintaining a “buy” call on Maybank with a target price of RM10.30 given the group’s positive outlook.
The research house said that the most obvious benefit from better digital offerings will be cost savings from areas such as lower personnel costs due to a lower headcount, as most processes are automated, lower cost-to-serve and less maintenance spending on vendors.
“Also, we understand that better productivity can be expected from personnel and more tailored customer focus. The digital initiatives are also expected to enhance revenue through more cross selling and bundling of products.”
With data analytics, MIDF Research said Maybank could tailor financial solutions for its customers. This includes on-boarding of SMEs, which are mainly online traders, and subsequently enhancing deposit-taking capabilities.
While it is optimistic on the potential of digital initiatives, MIDF Research said the cost and revenue associated from these initiatives are embedded into the group’s financial results. Therefore it is very difficult to truly measure the impact.
“Nevertheless, we have seen cost-to-income ratio on a downtrend recently for the group where it posted 47.9% in Q2’FY17 from 50.3% and 48.9% in Q1’FY17 and Q2’FY16 respectively, which might give an indication on the impact of the digital initiatives.”
MIDF Research said it understands the need for Maybank to maintain its dominant position in the digital offering due to the fact that the number of cashless transactions, whether through internet banking, mobile wallet or debit cards, are on the rise.
“We are not surprised by the management’s expectation of transaction value via mobile for the group to reach RM22 billion in 2017, or 95% year-on-year growth.”
Meanwhile, Hong Leong Investment Bank (HLIB) Research said it is positive on Maybank’s latest move, as decent return is expected from its digital effort, especially in garnering new potential business (new loan applications, current accounts and savings accounts) with a shorter turnaround time.
“The growth of digital banking forces banks to re-tailor their business model, including recurring investment in digital banking, to remain competitive and relevant. While investment value earmarked for digital initiatives is unknown, we believe Maybank is leveraging on its in-house digital R&D team, hence eliminating the exorbitant consultant fees.”
The research house said it continues to like Maybank for its well-balanced exposure in both retail and corporate segments.
“Maybank is the front runner beneficiary and the best proxy to ride on a continued expansion in the Malaysian economy.”
HLIB Research is maintaining a “buy” call on Maybank with a target price of RM10.70. The stock closed 18 sen, or 1.97%, higher at RM9.34 today, with some 16.87 million shares changing hands.