KEY INVESTMENT HIGHLIGHTS

• 9MFY24's Core NP of RM7,556m was Within/Within our/street forecasts: 78%/77% of full-year forecasts
• Management's tone: Optimistic
• Core themes: (a) Strong NOII growth, (b) Gross loans impacted by FX, (c) NIM compression but will likely be stable
• Forecasts: no change
• Maintain BUY | Unchanged TP of RM12.11 | based on an unchanged FY25F P/BV of 1.46x

Results in a nutshell:

▲9MFY24's Core net profit (NP) of RM7,556m up by +8.5%yoy.

Main driver was the strong net income growth of +8.7%yoy led by NOII growth. Despite negative JAWS, PPOP grew +7.2%yoy to RM11.4b.

▸ 3QFY24's Core NP of RM2,538m up by +0.3%qoq. Net income declined quarter-on-quarter but also did OPEX. Main reason for the decline in net income was NIM compression of -3bps and lower gross loans.

▸ Gross loans fell by -0.7%qoq, coming up to +4.8%YTD (annualized). Lower gross loans in the quarter due to FX impact from the strengthening of the Ringgit in the quarter. Excluding the impact of FX, 3QFY24 gross loans would have grown +2.3%qoq.

▸ Deposits flat at 0.0%qoq, coming up to +1.4%YTD (annualized). This was contributed by lower CASA (-5.0%qoq) as corporate withdrawals. FX was also a factor. Discounting FX impact, group deposits would have grown +2.9%qoq.

▲GIL moved by -2bps to 1.26%, LLC currently at 121%.

Improvements in GIL ratio were due to recoveries and write-offs. All-in, GIL ratio trends seem stable across most consumer and business lines in home markets with some uptick from Malaysia's retail SME digital and consumer portfolios.

Have a look at:

▲NOII saw strong growth in 9MFY24. NOII grew +26.0%yoy to RM7.49b (including Islamic banking NOII). Main driver was the +13.4%yoy growth to RM3.33b in core fees contributed by higher wealth fees, loan-related fees, IB advisory and brokerage fees. Meanwhile, insurance segment rebounded to RM0.13b from -RM1b due to higher underwriting income across Life/Family and General businesses from improved business growth. This moderated the lower Treasury income (-3.6%yoy to RM3.72b).

▼NIM compression. NIM saw a compression of -10bps yoy in 9MFY24. We understand that this was due to loans competition especially on the retail space. However, management expect that NIM will be stable around current level and that it will not sacrifice pricing for loans. We are monitoring potential deposits competition in 4QFY24 though.

▼Higher OPEX in 9MFY24. Higher OPEX came in from all segments. Personnel cost grew +11.9%yoy to RM6.34b due to collective agreements, sales incentives, and medical inflation costs. Establishment cost grew +10.2%yoy to RM1.77b from IT costs. Meanwhile, marketing cost grew +13.3%yoy to RM0.33m due to higher gift points expenses and publicity spend and admin & general cost grew +5.4%yoyto RM2.22b due to increased commission and brokerage fees due to higher trading volume as well as other general expenses. However, OPEX improved by -2.0%qoq in 3QFY24.

▸ YTD annualised gross loans grew for all markets if in home market terms. MY saw gross loans grew +8.0%YTD (ann.) to RM410.5b, SGD gross loans grew +14.5%YTD (ann.) to SGD52.6b and IND gross loans expanded +8.9%YTD (ann.) to IDR125.5t. However, due to the strengthening Ringgit in 3QFY24, international markets (SG and IND) gross loans fell -0.2%YTD (ann.) due to currency translation effect. While we do expect Ringgit to strengthen again in FY24, we foresee a more gradual trend as a oppose to the sharp trend in 3QFY24. Hence, impact may be lesser going forward.

Forecasts unchanged. As the result came in within our expectations, we make no changes to our earnings estimates.

Maintain BUY call: Unchanged GGM-TP of RM 12.11. The TP is based on an unchanged FY25F P/BV of 1.46x.

(GGM assumptions: FY25F ROE of 10.6%, LTG of 3.0% & COE of 8.2%)

Source: MIDF Research - 27 Nov 2024