Results

• Results in line. 3QFY18 net profit of RM122.6m (-5.5% yoy, -0.2% qoq) brought 9MFY18 net profit to RM380.4m (-3.6% yoy). The results were in line with expectations, accounting for 74.4% and 75.7% of HLIB and consensus full-year forecasts respectively.

Deviations

• In line.

Dividend

• None. YTD dividend stood at 8.5sen, translating to 35% payout and dividend yield of 2%.

Highlights

• 3Q18. Total operating income touched RM388m (+2.5% yoy), led by higher NII (+2% yoy) and NOII (+4.1% yoy). Despite higher operating income, net profit eased by 5.5% yoy to RM122.6 on the back of higher opex (which rose 23.5% yoy to RM215m). Credit cost and net LLP lowered to 2bps and RM7.9m (from -8bps and -RM33.5m a year ago), mainly on the back of a writeback in corporate segment.

• 9M18. Despite higher NII and NOII (which increased by 5.6% and 8.1% yoy arising from NIM expansion and higher forex gains), 9MFY18 net profit declined by 3.6% yoy to RM380m, mainly due to surging opex (+13.9% yoy).

• Loan dipped. Loan growth remained subdued at -0.5% yoy (below industry average of +4.1%%), dragged mainly by lower RAR loans. Higher RAR loan, on the other hand, grew 12.4% yoy as all sub-segments recorded growth (namely consumer unsecured and share margin). Alliance One Account (AOA) continued to rake higher sales RM574m in 9MFY18 and RM310m in 3Q18.

• Deposits moderated. Deposits eased by 5.6% qoq on the back of lower fixed deposits (-14.2% qoq). CASA was flat on qoq but rose 4.3% yoy and its composition stood healthily at 39.3%.

• Negative JAW again. Expenses in 3QFY18 increased by 23.5% yoy and 13.9% yoy in 9MFY18. ABMB booked RM36m expenses for its transformation in 3QFY18 (YTD; RM59.5m and expected to remain on the high side for the rest of FY18). CTI increased to 49.8% in FY18.

• NIM. YTD, NIM increased by 10bps to 2.36% (from 2.26% in FY17), mainly on the back of yield improvement from higher RAR loans and lower cost of funds (on the back of more efficient funding mix).

Risks

• Somber reception on new products launched and additional investment to fine-tune business.

Forecasts

• We fine tune our FY19 net profit by +0.3% to account higher loan growth assumption in FY19 (6% vs 5% previously).

Rating

HOLD ( ↔ )

• Despite subdued loan growth, its focus on higher RAR loans was overwhelming especially on AOA products. Nevertheless, ABMB is the main beneficiary from the recent OPR hike as it estimated further expansion on NIM, which in turn could lead to high NII.

Valuation

• Maintain our HOLD rating with higher TP RM4.30 as we roll forward our valuation base year to FY19. Our TP is derived from GGM model (based on COE 10.8% and WACC of 8.6%)

Source: Hong Leong Investment Bank Research - 27 Feb 2018