The Group (ABMB) reported a sequentially weaker net profit of RM130.2m (+26.3% YoY, -26.5% QoQ) for 4QFY23, as benefits from the cumulative rate hikes dissipated amid deposit competition. Cumulative FY23 net profit of RM677.8m (+18.3% YoY) is within expectations at 102% and 101% of our and consensus full-year estimates respectively however. Improvements were seen all round, with net interest and client-based fee income higher, while loan loss provisions moderated. We remain affirmed of the Group’s prospects, underpinned by its refreshed ACCELER8 2027 strategy which is also likely to drive more significant growth over the longer-term. Our dividend-based target price of RM4.00 and Outperform call are retained. ABMB declared a second interim dividend of 10sen, bringing FY23 dividend to 22sen.

• Net interest income for FY23 was higher by 11.6% YoY to RM1.65bn, driven by higher loans volume (+RM76.9m) and benefits from the policy rate (OPR) hikes (+RM77.9m). Client-based fee income (excluding brokerage) inched 1.0% higher YoY to RM284.1m meanwhile, as wealth management (+2,3%) and foreign exchange sales/trade fees (+16.7%) contributions mitigated a drop in banking service fees.

• Net interest margin (NIM) improved 11bps for the year to 2.64% (FY22: 2.53%), with the uplift coming predominantly from the OPR hike, as unwinding of modification losses also helped. CASA ratio remains at a relatively high 41.9% despite a 9.7% YoY drop mainly due to shifts to fixed deposits in search of higher yields. NIMs are expected to be sustained at between 2.50% and 2.55% in FY24, the drop vis-à-vis FY23 due to rising cost of funds.

• Loans growth was a relatively steady +6.2% YoY, still sustained by the SME segment (+13.1% YoY), and the commercial banking (+14.8% YoY) business. Loans growth opportunities are expected to be robust in the, with guidance of growth between 8% and 10% for FY24.

• Asset quality appears to have taken a hit with a significant rise in newly impaired loans (Figure 4), with the gross impaired loans ratio at 2.51% (FY22: 1.85%). This is attributed to one account corporate account, with business-as usual increases largely within expectations. Loan loss coverage is at 123.7% (FY22: 141.5%). Improvements were seen in its net credit cost which fell to 31.9bps (FY22: 48.1bps), though this is very much the result of a net release of its management overlays (RM207.6m). Net credit cost guidance for FY24 is between 30bps and 35bps.

Source: PublicInvest Research - 31 May 2023