Investment Highlights

• We maintain HOLD on MBSB with a lower fair value (FV) of RM0.75/share from RM0.80/share, pegging the stock to a lower FY25F P/BV of 0.6x (previously: 0.7x), supported by ROE of 4.8%. No change to our neutral 3-star ESG rating.

• We trim our FY/24F/25F/26F net profits by 20%/0.3%/4% after raising our credit cost assumptions.

• 6M24 earnings were below expectations, making up only 38.4% of our full-year projection and 42.4% of consensus estimate. The variance to our estimate was mainly due to lower-than-expected non-fund-based income and higher- than-projected allowances for financing losses.

• The group reported lower net profit of RM55mil (-30% QoQ) due to higher provisions, OPEX and taxation which offset increased net income growth. Net fund-based income rose 20.1% QoQ, driven by expansion of loans and an improved margin by 42bps to 2.6%. Meanwhile, other operating income increased to RM47mil (+15.9% QoQ) in 2Q24, attributed to higher fee income mainly from Government Scheme Funds and brokerage fees, partially offset by lower investment income.

• 6M24 saw the group’s core earnings decline by 15.6% YoY to RM133mil, attributed to higher provisions for loan losses (increase in ECL for stage 2 loans and lower recoveries). Also, the drop in earnings was contributed by higher OPEX from a rise in personnel, establishment, general and administrative expenses.

• Growth in operating expenses (+47.8% YoY) outpaced total income (+44.8% YoY), resulting in a negative JAW of 3% in 6M24. This resulted in an increase in CI ratio to 56.9% in 6M24 compared to 55.8% in 6M23.

• In 2Q24, total customer deposits grew by 1.1% QoQ to RM39.9bil. Total deposits stood at RM49.2bil as of the end of 2Q24.

Source: AmInvest Research - 28 Aug 2024