INVESTMENT HIGHLIGHTS

• Risk management have evolved for the Group, utilising technology and data analytics

• Data analytics will assist in balance sheet optimization and efficient use of resources and capital

• The Group is driving ESG practices to the fore of its operations

• Ensuring resiliency

• No revision to FY19 and FY20 forecast

• Maintain BUY with unchanged TP of RM11.00 based on PB multiple of 1.5x

Investor day: Risk management key take away. We attended an Investor Day to highlight the Group Risk Management yesterday. Below are the key takeaway from our meeting:

• Risk management methods have progressed rapidly with more reliance on technology

• Data analytics is one of the levers for business decisions and size of data will be a competitive advantage

• Understanding and minimizing surprises to asset quality

• The Group has the ability to influence the Environment, Social and Governance (ESG) agenda

MFR 9 a game changer; from current to forward looking. The implementation of MFRS 9 caused banks to rethink its loss impairment and credit cost recognition, from actual to a forward looking basis. This had also changed the way the Group views its risk management practices whereby it is more proactive rather than historical and passive. To achieve this, the Group are continuing to transform its capabilities in terms of personnel.

Technology is a key component to risk management. In addition, the Group employs the use of technology to accomplish this proactive risk management. Big data are used in conjunction with artificial intelligence and machine learning to enhance its predictive capability. This allows the Group to better assess the current and possible future operating environment to assist in its business decisions such as achieving an efficient capital allocation, balance sheet optimisation and control asset quality. We believe that some of the benefits from this are the lower credit cost seen by the Group thus far.

Source: MIDF Research - 5 Jul 2019