KEY INVESTMENT HIGHLIGHTS

• 9MFY24's Core NP of RM375m was Within/Within our/street forecasts: 76%/76% of full-year forecasts
• Management's tone: Neutral with slight optimism
• Core themes: (a) strong income growth in 3QFY24, (b) writebacks supported NP expansion this year, (c) loans competition affecting NIM
• Forecasts unchanged
• Maintain SELL | Revised TP of RM2.35 | based on an unchanged FY25F P/BV of 0.45x

Results in a nutshell:

▸ 9MFY24's Core net profit (NP) of RM375m up by +3%yoy. Writebacks this year assisted in the higher NP, but PPOP level saw a decline.

▲ 3QFY24's Core NP of RM146m up by +23%qoq. Strong net income in the quarter contributed to the quarterly performance. Writebacks came in as a boost.

▲ Gross loans grew by +2.3%qoq, coming up to +5.9%YTD. Main factor was community banking loans with mortgage and personal financing as the key drivers within the community banking segment.

▲ Deposits grew by +3.9%qoq, coming up to +4.4%YTD. Strong CASA growth with FD slightly declining. However, there is still some way to go to reach CASA ratio target.

▲ GIL moved by -15bps to 1.74%, LLC currently at 99%.

Continuous recovery efforts and maintaining underwriting standards led to GIL lower. Improvements were seen in all segments.

Have a look at:

▼ Lower NII due to NIM compression. NII fell -0.8%yoy lower in 9MFY24 as NIM came under pressure. This came as reported NIM compressed by -13bps yoy due to loans competition. However, this was moderated by Islamic Banking income and NOII.

▼ Higher OPEX due to capacity building and compliance. 9MFY24 OPEX came in +17.8%yoy higher leading to negative JAWS. Main reasons were the higher personnel cost (+16.9%yoy) due to capacity building and establishment cost (+25.4%yoy) due to IT related expenses for compliance purposes.

▸ Writebacks saved the day but could see provisions in 4QFY24. Net credit cost (NCC) up to 9MFY24 came in at - 3bps indicating Affin saw writebacks this year. However, management expects NCC to come in at 5-10bps suggesting that there will be provisions in 4QFY24.

▼ PBT and ROE FY24 targets revised lower. The targets for PBT and ROE for FY24 were revised lower to RM750m (from RM1,000m) and 5% (from 7%). We opine that the pressure on NIM is part of the reason. However, on the bright side, it does indicate a strong finish for the year.

Forecasts unchanged. No change to our earnings estimates given the results were within expectations.

Key downside risks. (1) faster than expected NIM compression, (2) reversal in asset quality improvement, (3) faster than expected growth in OPEX.

Maintain SELL call: Unchanged GGM-TP of RM 2.35. The TP is based on an unchanged FY25F P/BV of 0.45x which is +1SD of its historical P/BV to reflect the positive sentiment following the entrant of a new largest shareholder. However, despite the solid 3FY24 performance, we believe that the share price has moved ahead of its fundamental. Hence, we retain our SELL call.

(GGM assumptions: FY25F ROE of 4.4%, LTG of 3.0% & COE of 7.0%)

Source: MIDF Research - 25 Nov 2024