The Group reported a strong net profit of RM212.2m (+45.3% YoY, +105.9% QoQ) for 1QFY23, though this was very much aided by a one-off recovery (RM17.5m) and management overlay (RM41.4m) write-back. Making up 34% and 32% of our and consensus full-year estimates respectively, the numbers are deemed above expectations (at 25% of full-year estimates, excluding the exceptional items). We raise FY23 estimates by +7.2% to account for the one-off items, though FY24/FY25 is retained. We remain affirmed of the Group’s prospects, as it continues to reap the rewards of its balance sheet optimization exercise in recent years. There is also scope for earnings upside from the further release of its pre-emptive provisions (RM408m). Our Outperform call is retained with an unchanged dividend-based target price of RM4.00.
- Total income for 1QFY23 slipped 1.8% higher YoY to RM1.87bn, weighed by a notable drop in its non-client-based income, particularly treasury and investment income (-RM37.9m) which swung into a loss position. This is despite steady growth in i) net interest income (+7.6% YoY) amid encouraging growth in it loans portfolio and resultant benefits from policy rate hikes, and ii) client-based income (excluding brokerage) which improved +7.5% YoY due to better wealth management (+21.5% YoY) and foreign exchange sales (+13.5% YoY) contributions.
- Net interest margin (NIM) improved to 2.57% (4QFY22: 2.50%) for the current quarter, benefitting from ongoing policy rate hikes and its healthy funding mix (CASA ratio: 50%). Management conservatively expects NIMs to remain in the ~2.50% range despite expectations of further policy rate hikes as competition for deposits are starting to appear more pronounced.
- Loans growth was an encouraging +6.7% YoY, sustained by the SME segment (+13.9% YoY), as well as the corporate/commercial banking (+13.6% YoY) business – both making up a cumulative 50% of loans book.
- Asset quality issues appear to be under control, with gross impaired loans positions of the SME, corporate and commercial segments recording sequential improvements. Additionally, the Group has also seen financial assistances lowered to RM3.7bn (@4QFY22: RM6.3bn) of its loan book as at the current quarter. Overall gross impaired loans (GIL) ratio is 1.8% (4QFY22: 1.8%). Normalized business-as-usual net credit cost for 1QFY23 is 9.1bps, though headline number this current quarter is -3.7bps due to write-backs. Loan loss coverage remains healthy at 133.2% (4QFY22: 141.5%).
Source: PublicInvest Research - 1 Sept 2022