9MFY21 PATAMI of RM320.1m (+34%) beat expectations on stronger loans, NII and associates with better provisions, leading us to upgrade our FY21E/FY22E PATAMI by 29%/17%. The solid results could also be a translation of management’s FY22 targets on improved income streams and optimised operating controls. For now, there may still be some reservations on the group’s ROE which could improve with consistent earnings delivery. Upgrade to MP (from UP) with a higher GGM-derived PBV TP of RM1.55 (from RM1.40).

9MFY21 exceeded expectations. 9MFY21 reported PATAMI of RM320.1m, beating our/consensus estimates, making up 99%/88% of respective full-year expectations. The stronger-than-expected results appear to be due to faster-than-expected loans and NII expansion for the group, lower-than-expected impairments and better associate performances. No dividend was declared as expected. The group typically pays its dividends once per year.

YoY, 9MFY21 total income improved slightly to RM1.67b (+2%) as NII (+19%) gained from 9% expansion in loans base with a better annualised NIM landscape (2.03%, +22 bps). This was offset by a steep decline in NOII (-26%) from poorer net trading gains. excluding modification loss of RM79.9m in 2QFY20, 9MFY21 total income would have been 3% softer. Meanwhile, CIR was relatively flattish 60.4% (vs 60.7%). Loan impairment significantly improved as compared to the previous period (-36%) as 9MFY21 benefited from a better economic climate and frontloaded provisioning. This lead to our computed annualised credit cost to record at 50 bps (vs. 83 bps in 9MFY20). Meanwhile, share of results from associates and joint ventures also rose by 94% (RM36.1m). All in, 9MFY21 PATAMI came in at RM320.1m (+34%).

QoQ, 3QFY21 total income was 5% weaker as NOII (-18%) performance was affected by softer trading sentiment. NII improved 4% on a larger loan base amidst stable NIMs. However, as much less provisioning were made (-41%), PATAMI improved to RM133.2m (+13%).

Ramping up for 2022. From our previous engagement with management, several ambitious targets have been set for FY22, specifically a PBT for >RM1.0b. This will leverage on enhanced channels to boost its wealth management businesses with better insurance contributions from the Generali venture (to be completed by 1HFY22). Improving demand for loans from the ongoing economic reopening will also help. Meanwhile, management hopes to keep NIMs manageable by capturing a larger retail share with the help of digital platforms. Amidst enlarged income streams, management hopes that efforts to keep costs stable would translate to significant improvements to CIR readings.

Post results, we raise of FY21E/FY22E earnings by 29%/17%. We improve our loans growth assumptions from 6%/2% to 9%/4%, lower credit cost assumptions for FY21E from 59 bps to 52 bps and improve associate performances. That said, our assumptions for FY22 still lags behind management’s PBT target as we are still wary on the strength of NOIIs going forward, as trading sentiment remains tepid which could affect the take- up of wealth management products.

Upgrade to MARKET PERFORM (from UNDERPERFORM) with a higher TP of RM1.55 (from RM1.40). On top of the abovementioned earnings revision, we also increase our GGM-derived PBV to 0.32x (from 0.29x, 1.5SD below mean). Sentiment for the stock will improve progressively if it is able to deliver in accordance to management’s targets towards FY22. That said, the group ROE is relatively moderate amongst its banking peers. EBITDA: medium single digit decline (flat-low single digit decli

Source: Kenanga Research - 22 Nov 2021