1QFY22 PATAMI of RM1.40b (-9%) is within expectations as earnings were hampered by the prosperity tax. Going forward, management appears confident that its market leading share could allow the group to perform better with the economy reopening, leading to improved loans and deposits growth guidance. Better NIMs are anticipated from the recent OPR hike. No dividend was declared during this quarter, also as expected. Maintain MP and GGM- derived TP of RM4.40.

1QFY22 within expectations. 1QFY22 PATAMI of RM1.40b came in within expectations, making up 25%/24% of our/consensus full-year estimates. No dividend was declared this quarter, which is also expected as the group typically pays its dividends bi-annually.

YoY, 1QFY22 total income declined by 3%, where NII was stagnant as NIMs saw a 6bps decline amidst a 3.7% growth in loans. The weakness is mainly derived from softer Islamic banking performances. Meanwhile, NOII was shaved by 11% due to softer unit trust sales and lower investment gains. While operating costs saw a marginal increase (+2%), impairment allowances eased by 50% amidst a bright operating landscape with led PBT to come in flat at RM2.0b. Credit cost marked at 11bps (-12bps). However, due to the incurrence of prosperity tax, 1QFY22 PATAMI came in at RM1.40b (-9%).

QoQ, 1QFY22 total income gained 3% as NII (+1%) saw sequential improvements in most fronts while NOII (+11%) was tipped by significantly lower revaluation losses. Similarly, loan provisions were comparatively lower but due to higher effective taxes during the quarter, PATAMI only rose by 1%.

Briefing highlights. Management came off optimistic with the recent performance and improved their FY22 loans and deposits growth target to 5% (from 4-5%) indicating that they could be experiencing a higher-than-expected pick-up in its retail books. Residential mortgages make up c.30% of its total portfolio. Additionally, the earlier-than-anticipated rise in OPR also called for an improved NIM guidance where there could be marginal gains by year-end. Other key guidances remain intact, with credit cost target maintained at <20 bps with management indicating that no major writebacks are likely in FY22. We see this to be aligned with Bank Negara’s tone to mitigate premature writebacks. Meanwhile, the group’s active repayment assistance for outstanding loans stand at 6% as of 30 April 2022 (15 Feb 2022: 8%) as these accounts are progressively rehabilitated. Only 3% of these loans have missed payments, a similar proportion against its peers.

Post results, our FY22E/FY23E earnings were tweaked by +1% on model updates.

Maintain MARKET PERFORM and TP of RM4.40. Our TP is based on an unchanged GGM-derived FY23E PBV of 1.57x (0.5SD below mean). The group commands the highest ROE amongst its listed banking peers. However, we believe this is already priced in at current levels given its moderate dividend potential which may thwart further interest in the stock.

Source: Kenanga Research - 31 May 2022