Results

4QFY13 net profit of RM1,025.6m (-2.1% qoq; +4.5% yoy) took FY13 to RM4,064.7m (+6.2% yoy), in line with expectations or accounted for 99.3% and 98% of HLIB and consensus full year forecast, respectively.

Deviations

Largely in line.

Dividends

Second interim single tier of 30 sen (vs. 30 sen) with ex and payment dates on 18 and 28 Feb respectively. This take total for FY13 to 52 sen or 45% payout (vs. 50 sen), slightly lower than our 55 sen projection or 47.5% payout.

Highlights

Loans growth of 11.8% yoy (domestic 12%), in line with guidance of 11-12% (12-13%).

4QFY13 results were largely in line with continued loans growth, sustained non-interest income, well contained CIR (within its target of less than 32%), asset quality improved slightly (after the slight deterioration in 3QFY13) thus resulting in slightly lower provisions.

Introduced FY14 KPIs with ROE of more than 20% while loans and deposits growth targets were 10-11%. It will be focusing more on the SME, which is niche other than the retail segment (which contributes more than 60% of total loans) to offset the expected slowdown in the retail segment.

While we laud its execution track record, we are more conservative with ROE, loans and deposits growth projections near or at the lower ranges of its KPIs. This is in view of the expected slowdown in the retail segment arising from subsidy removal and punitive measures on property.

The group believes that BNM’s new lending rate regime will be based on KLIBOR and there will be minimal changes to the eventual effective interest rate charged on mortgages.

It did not commit to any dividend payout ratio but strives to maintain rising trend (in line with profit growth) in terms of quantum which will translate into payout ratio that is close to FY13 level. We are projecting 43-45% payout ratio for FY14-16 or circa 3% yield.

Risks

Unexpected jump in impaired loans, lower than expected loan growth and higher than expected erosion in NIM.

Forecasts

FY14-15 cut by circa 3% post final results adjustments.

Rating

HOLD

Positives:

• Above industry asset quality and ROE;
• Excellent track record in delivering guidance and consistency in growth.

Negatives:

• Dividend payout ratio lower than previous years and uncertainty about quantum of counter cyclical buffer.

Valuation

Post final results adjustments, we have raised our target price to RM19.08 (vs. RM18.80 previously) based on Gordon Growth (ROE of 20% and WACC of 8.8%).

Source: Hong Leong Investment Bank Research - 6 Feb 2014