KEY INVESTMENT HIGHLIGHTS

• 6MFY25's Core NP of RM367m was Within/Within our/street forecasts: 50%/50% of full-year forecasts
• Management's tone: Optimistic
• Core themes: (a) strong NOII growth, (b) strong gross loans growth, (c) higher FD growth and NIM compression
• Forecasts unchanged
• Maintain NEUTRAL | Unchanged TP of RM4.64 | based on an unchanged FY26F P/BV of 0.88x

Results in a nutshell:

▲ 6MFY25's Core net profit (NP) of RM367m up by +9%yoy.

Main contributors were higher net income (+15.2%yoy) and lower provisions (-88.4%yoy).

▲ 2QFY25's Core NP of RM190m up by +8%qoq. Supported by net income growth of +12.2%qoq. Meanwhile OPEX grew at a slower pace than income growth (+5.5%qoq). Moderated by higher provisions.

▲ Gross loans grew by +3.5%qoq, coming up to +6.0%YTD.

Gross loans grew +14.8%yoy with strong growth in all segments. SME, Commercial, Corporate and Consumer banking loans expanded +16.4%yoy to RM15.6b, +16.2%yoy to RM7.9b, +11.6%yoy to RM6.3b and +14.3%yoy to RM29.3b respectively.

▸ Deposits grew by +2.0%qoq, coming up to +2.7%YTD.

Customer deposits grew +13.8%yoy. However, this was led by FD which expanded +27.4%yoy to RM32.2b. Meanwhile, CASA grew +53%yoy to RM24.1b.

▲ GIL moved by -15bps qoq to 2.02%, LLC currently at 106%.

Improvements in all segments. GIL ratio for SMEs, and Commercial & Corporate improved -10bps to 1.8% and 1.9% respectively. Consumer GIL ratio was better by -20bps to 2.2%.

Have a look at:

▸ NII growth was driven by higher loans rather than NIM. NII increased +15.0%yoy to RM955.9m. However, this was supported by the strong loans' growth rather than NIM expansion. In fact, NIM compressed by -1bps in 1HFY25. This could possibly be due to the higher FD growth vs. CASA. We will be monitoring this closely as NIM may come under pressure in 3QFY25 due to year-end seasonal deposits competition.

▲Strong NOII growth. NOII drove ROE as it grew +16.1%yoy. Main drivers were wealth management (+13.3%yoy), FX sales/trade fees (+19.0%yoy) and treasury & investment income (+RM28.5m).

▲ Traction with regional and SME strategy. Strong regional growth in both loans (+16%yoy) and deposits (+20%yoy) across Sarawak, Penang and Johor. Meanwhile, SME continued to gain loan market share and outgrow industry growth (ABMB: +14% vs industry: +9%). As a result, SME loan market share continued to expand to 5.32% from 5.19% (Mar'24).

Forecasts unchanged.

Key downside risks. (1) NIM compression higher than expected, (2) Reversal in NOII, (3) Asset quality deterioration Maintain NEUTRAL call: Unchanged GGM-TP of RM 4.64 (from RM4.64). The TP is based on an unchanged FY26F P/BV of 0.88x.

(GGM assumptions: FY26F ROE of 9.8%, LTG of 5.0% & COE of 10.5%)

Source: MIDF Research - 29 Nov 2024