FY22 net earnings of RM572.8m (+60%) came within expectations but a full-year dividend payment of 18.5 sen was a welcomed surprise. With the current measures and further initiatives to be taken, management opines that it is able to obtain more SME accounts and enjoy better asset quality in FY23. NIMs could remain afloat thanks to the OPR hike. Maintain OP but reduce our TP to RM3.95 (from RM4.10) on book value updates.

FY22 in line with expectations. FY22 net profit of RM572.8m is within expectations, making up 100%/101% of our/consensus estimates. An interim dividend of 10.2 sen was declared, amounting to a full-year payment of 18.5 sen (50% payout, in line with pre-pandemic levels). This outpaced our conservatively anticipated 40% payout / 15.0 sen payment.

YoY, FY22 total income upped 3% to RM1.87b as NII gained 9% thanks to a larger loans base (+5%) and better annualised NIMs (2.53%, +18 bps). However, this was mitigated by NOII (-18%) coming off from poorer treasury and investment gains but cushioned by better wealth management and forex- related fees. CIR was stable at 44.1% as operating expenses rose in tandem with revenues. Meanwhile, provisions shed 59% as asset quality prospects were more encouraging, resulting in a much lower credit cost of 48bps (- 73bps). Even with the recognition of a one-off prosperity tax, FY22 earnings came in at RM572.8m (+60%).

QoQ, 4QFY22 NII diminished by 8% due to some modification losses being booked during the quarter. Meanwhile, NOII inched by 2% on lower fee expenses (mainly card related). Owing to the lapse of URUS, management booked further provisions during the quarter out of prudency, driving credit cost to 65bps (+51bps) and provisions (RM73.2m, +383%). This resulted in weaker sequential earnings of RM103.0m (-32%).

Briefing highlights. Management has achieved its FY22 targets and believes the group could do better in certain aspects in FY23. With regards to loans growth, gains were primarily seen in the SME space which outpaced mortgages, contrary to most banks. While the group continues to bank on greater SME numbers in line with the nation’s economic recovery, so efforts will be made to increase its consumer share. This led management to aim for 6-8% loans growth for FY23 (FY22: 4.6%). Meanwhile, NIMs are expected to remain stable as OPR hikes are likely to recalibrate any pressures from deposits competition. With regards to asset quality, the group is still keeping an eye on its rehabilitated accounts as 4% of its TRA mix (Apr 22: RM6.3b / 14% of loans book) are still missing payments. That said, asset strains should be easier, indicated by their credit cost guidance of 40-45bps (FY22: 48 bps). All in, this should uplift the group’s earnings for the coming year and yield a 10% ROE.

Post results, we raise our FY23E earnings by 1% from model updates. Meanwhile, we also introduce our FY24E numbers which we anticipate could see a more moderate profit growth of 12% from normalising provisions.

Maintain OUTPERFORM but with a lower TP of RM3.95 (from RM4.10). Although we leave our earnings mostly unchanged, we updated to a lower full-year book value in FY22 which led to a decline in our CY23E BVPS, leading to the lower TP. Our GGM-derived PBV of 0.87x (mean valuations) remain unchanged. The group’s dividend-ROE stands at an attractive level between the smaller cap banks. This is aided by the group returning to pre-pandemic payouts (50%) which we believe could whet up better appetite among investors.

Source: Kenanga Research - 1 Jun 2022