The Group reported saw a largely unchanged 4QFY22 net profit of RM2.17bn (+5.4% YoY, +0.1% QoQ) on a sequential basis despite declines in net operating profit (-13.1% QoQ) as a notable drop in provisions mitigated the negative effect. Cumulative FY22 net profit of RM8.23bn (+1.7% YoY) is within estimates at 101% and 99% of our and consensus full-year numbers respectively. Expectedly benefitting from the various policy rate hikes last year, FY22 was also marred by various one-off cost items, leading to a higher cost-income ratio of 46.4% (FY21: 45.3%) for the year. Near-term challenges notwithstanding, we continue to like the Group’s prospects, underpinned by its M25+ initiatives. Our earnings estimates are left unchanged, alongside the introduction of FY25 numbers, with Outperform call and TP of RM9.70 retained.

• Net fund based income rose 8.4% YoY to RM20.69bn in FY22, bolstered by a 7bps expansion in net interest margin (NIM), though Group CASA ratio fell to 40.9% (FY21: 47.1%) and negating more significant benefits from the rate hikes. Growth initiatives for FY23 will be focused on its community financial services (mortgage, retail SME, SME+) segment, as well as its global banking business. Management expects potential NIM compressions of between 5bps to 8bps this FY23, largely on account of deposit competition.

• Non-interest income was 9.0% higher YoY at RM6.93bn for FY22 due in large part to marked-to-market gains on derivatives and financial liabilities (+>100% to RM3.55bn) and foreign exchange gains (+>100% to RM972m). Focus for FY23 will be on conventional and Islamic wealth management propositions across its home markets.

• Loans growth was static sequentially, though expanding an encouraging +6.0% YoY, underpinned by the consumer segment. Growth momentum is expected to be sustained by the Malaysian market despite moderations in economic growth, likely at par with industry growth (~5% YoY).

• Asset quality remains under control, reflected by the low formation of newly impaired loans (Figure 5). Previous quarters’ pre-emptive provisioning is not expected to recur going forward. Management also remains confident that total provisioning overlays of ~RM1.7bn will be sufficient to cushion against significant downside risks. Loan loss coverage improved to 131.2% (3QFY22: 122.3%) as the Group’s gross impairment loans ratio (GIL) fell 1.57% (3QFY22: 1.70%). Management is guiding for a net credit charge-off rate of between 35bps and 40bps (FY22: 40bps) for 2023.

Source: PublicInvest Research - 28 Feb 2023