The Group reported another steady quarter with 3QFY22 net profit of RM151.0m (+50.3% YoY, -12.6% QoQ) contributing to a cumulative 9MFY22 net profit of RM469.8m (+52.2% YoY). Exceeding both our and consensus estimates at 105% and 100% of full-year numbers respectively, the better-than-expected results were the result of strong net interest income growth (+11.0% YoY) and notably lwoer impairment charges (-63.8% YoY). We lift FY22/FY23/FY24 estimates by +19.3%/+8.1%/+3.6% to account for stronger margin assumptions and less pessimistic credit cost. We remain affirmed of the Group’s prospects as it continues to reap rewards from its balance sheet optimization exercise in recent years. Our Outperform call is retained with our dividend-based target price raised to RM3.80 (RM3.10 previously).

• Total income for 9MFY22 was 3.2% higher YoY to RM1.42bn, with net interest income growth (+11.0% YoY) weighed by weakness in non-interest income contributions (-17.9% YoY). Improvement in net interest income was driven by an improved deposit mix (+4.9% YoY impact) and re-pricing of its fixed deposits (+8.8% YoY impact). Non-interest income was hampered by an RM58.9m (-42.3% YoY) drop in treasury and investment income meanwhile.

• Net interest margin (NIM) jumped 19bps QoQ to 2.66% (2QFY22: 2.47%) due to a reversal of interest-in-suspense and lower modification losses which benefitted revenue. Management suggests that full-year NIM is likely to be in the region of 2.50% (9MFY22: 2.54%).

• Loans growth remained steady, higher by +3.0% YoY, on expansion in its SME (+9.1 YoY) and corporate/commercial banking (+8.2% YoY) portfolios, though mitigated by a 1.8% YoY drop in its consumer book (mortgage: -2.6% YoY, personal loans: -4.3% YoY).

• Asset quality does not appear to be exhibiting signs of stress, though management continues to maintain vigilance in light of ongoing uncertainties surrounding the pandemic. Overall gross impaired loans (GIL) ratio is 2.0% (2QFY22: 2.3%) with net credit cost (NCC) this current quarter at 3.2bps (2Q: 7.5bps). Cumulative 9MFY22 NCC is 32.5bps (9MFY21: 91.3bps), including management overlays of 26.4bps. Cumulative overlays in the last two years are ~RM430m. Loan loss coverage is 127.0% (2QFY22: 111.1%). To note, the Group has seen financial assistances lowered to RM9.52bn (@2QFY22: RM14.67bn) of its loan book, of which RM6.81bn (@2QFY22: RM10.9bn are under the PEMULIH moratorium.

Source: PublicInvest Research - 1 Mar 2022