Maybank excels as Malaysia’s ESG bellwether stock

CGS-CIMB Research has regarded Malayan Banking Bhd (Maybank) as its top ESG (environmental, social and governance) pick among Malaysian banks given its holistic approach to adoption, far-reaching impact and better disclosure relative to its peers.

Additionally, Maybank has been implementing its ESG initiatives through its regional network, benefiting a wider base of people in various countries.

In CGS-CIMB Research’s view, Maybank’s superior ESG standards are reflected in the following areas:

  • Maybank has put together a set of ESG risk acceptance criteria guidelines to govern the ESG standards of its borrowers; these are articulated in its 2020 Sustainability Report;
  • Since 2019, Maybank has a dedicated task force (Scrum teams) to advise (and monitor) its clients in ESG-related matters, primarily clients in sectors with high ESG risks,
  • Through its regional network, Maybank has been implementing its ESG initiatives in various countries, widening the base of beneficiaries.

“Maybank’s push for greater ESG adoption will enhance its reputation as a responsible financier and corporate citizen not only in Malaysia but also in all the markets it operates in,” opined analyst Winson Ng in a company update.

“This could also have a marginal positive impact on its earnings, primarily from increased exposure to borrowers with high ESG standards who carry lower credit risks.”

Moving forward, CGS-CIMB Research expects Maybank to focus on the following areas for greater ESG adoption:

  • Fully integrating ESG evaluation with all of its decision-making processes, including investments and loan origination;
  • Quantifying and disclosing exposures to and the risks of climate change, and
  • Increasing the value of green financing (Maybank targets for sustainability financing to amount to RM50 bil by 2025).

“Although we do not expect Maybank’s push for greater adoption of ESG standards to significantly improve its earnings, its superior ESG standards will place the bank in a favourable position when it comes to ESG evaluation by investors,” projected the research hosue.

All-in-all, CGS-CIMB Research maintained its “add” rating on Maybank premised on the potential re-rating catalyst of its projected recovery in its core net profit growth in FY2021F.

“Its FY2021F dividend yield is also attractive at 4.9%. We retain our FY2021-2023F EPS (earnings per share) forecasts and DDM (dividend discount model)-based target price of RM9.30,” added the research house.

At 9.32am, Maybank was up 4 sen or 0.48% at RM8.34 with 535,200 shares traded, thus valuing the company at RM95.19 bil. – May 18, 2021

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