1HFY21 PATAMI of RM186.9m (-2% YoY) is deemed broadly within our expectations in view of softer loans and trading performance in 2HFY21. At 47% of full year, this is deemed as below consensus estimates given. further challenges spurred by prolonged economic lull could turn 2HFY21 to come in weaker. NOII landscape is also not expected to be as vibrant as 2HFY20. Maintain UP and GGM-derived PBV TP of RM1.30.

1HFY21 broadly within expectations. 1HFY21 reported PATAMI came in at RM186.9m. We deem this to be broadly within our expectation (56% of full- year estimate) but below consensus (47%) as we reckon 2HFY21 could be weaker amidst higher impairment requirement and a softer investing environment. No dividend was declared as expected. The group typically pays its dividends once per year.

YoY, 1HFY21 total income decreased by 8% to RM1.12b. NII (+19%) continued to benefit from a growing loan base with NIMs expansions of 20 bps to 1.99%. Cost of fund was brought down with the widening CASA-to-deposit ratio of 22.5% (+2.6ppt). However, NOII fell by 32% owing to persistently lower treasury gains amidst some strength in fee-based income performance. Due to the lower top-line, CIR tipped to 61.0% (+2.7ppt). Meanwhile, loan impairments improved with a 33% decline possibly due to prior pre-emptive provisioning. Our computed annualised credit cost stood at 47 bps for 1HFY21 (-26 bps). Overall, PATAMI came in at RM186.9m (-2%).

QoQ, 2QFY21 total income was 8% stronger, being lifted by both NII (+10%) and NOII (+5%) from better NIMs and fees. Notably, the group booked 8% more loan provisioning, which is likely led by the lockdown implemented in Jun 2021. However, security asset impairment dropped by 44%. This with the stronger revenue led to 2QFY21 PATAMI of RM117.9m (+71%).

Challenges could arise in 2HFY21. Previously upbeat expectations for 2HFY21 should be moderated as the unexpected surge in Covid-19 cases and lockdown implementations have set back GDP growth expectations. This could dampen loans growth prospects for the coming quarters as the perquisites from higher vaccination rates could only materialise at the later part of the year. Meanwhile, the introduction of an opt-in blanket moratorium could likely increase portfolios needing assistance. That said, the group seems to be focusing on digital initiatives to improve its CASA mix which should further expand NIMs. There could be some risks in its NOII given prevailing softness in the investment markets as compared to the prior year. No updates on guidance for now.

Post results, we maintain our FY21E/FY22E earnings for now.

Maintain UNDERPERFORM and TP of RM1.30. Our TP is based on a FY22E GGM-derived PBV of 0.27x (2SD below 5-year mean). The stock is typically known as the least exposed in financing risks due to its higher NOII mix against peers, but given the expectations of a normalising trading landscape, this segment could be at threat until the group is able to gain substantial growth in its NII to make up for it. In the meantime, ROE and dividend yield leave much to be desired against its peers.

Risks to our call include: (i) lower-than-expected margin squeeze, (ii) higher- than-expected loans growth, (iii) better-than-expected improvement in asset quality, (iv) further slowdown in capital market activities, (v) favourable currency fluctuations, and (vi) changes in OPR. EBITDA: medium single digit decline (flat-low single digit decli

Source: Kenanga Research - 27 Aug 2021