• Results were mixed for companies under our coverage in 3QCY24. Bursa Malaysia (Bursa)’s net profit came inline with our full-year forecast, while MBSB surprised us with a higher-than-expected net profit.

• Meanwhile, the rest of the banks (not under coverage) reported improvement in 3QCY24 across QoQ, YoY, and YTD performance, except for Bank Islam, which saw a decline in both QoQ and YoY net profit.

• For 4QCY24, we anticipate better net profit driven by window dressing, along with lower ECL. However, we foresee intense competitions within the banks for deposits could pressure NIM/NPM.

• We establish a NEUTRAL stance on the Financials. We have a BUY call on Bursa (TP: RM11.10) and a HOLD call on MBSB (TP: RM 0.80).

3QCY23 Results were Mixed; Bursa - Inline, MBSB - Above

The recently concluded 3QCY24 results were mixed for companies under our Financials coverage. Bursa Malaysia (Bursa) net profit came inline with our full-year forecast, while MBSB surprised us with a higher-than-expected net profit. The strong growth in MBSB’s net profit (+34% YoY) was driven by a significant increase in noninterest income, lower cost-to-income (CIR), and reduced expected credit loss (ECL). Consequently, we raise our 2024F’s earnings by 8% to RM326mn from RM306mn.

The Rest of the Banks’ Net Profit Improved across QoQ, YoY, YTD, Except for BIMB

Net profit for the rest of the banks (not under coverage) improved across QoQ, YoY, and YTD performance (refer to Table 1 and Chart 1). The reasons for better results for majority of the banks were due to improvement in both net interest income and non-interest income, alongside lower expenses, and ECL. However, Bank Islam experienced a decline in both QoQ and YoY net profit, primarily due to higher total overheads (+7% YoY), which offset the higher net income and lower net allowance for impairment on financing.

Banks Reported Higher YoY Gross Loan Growth, Showed the Strongest NPM

All banks, including MBSB reported higher YoY gross loan growth, with Alliance Bank led the industry with a 14.8% YoY increase, while bank Islam reported the slowest growth at 1.7% YoY. Notably, MBSB’s net profit margin (NPM) expanded for three consecutive quarters, reaching 2.55% in 3Q24, up by 73bps from 1.82% in 4Q23. This improvement was driven by higher CASA ratio (3Q24: 8.8%, 4Q23: 6.2%). However, MBSB’s gross impaired financing ratio (GIFR) of 6.72% in 3Q24, remained above its peers, though it showed improvement and was at similar level to 3Q23.

Better 4QCY24 due to Window Dressing,

For 4QCY24, we anticipate better net profit due to window dressing to attract depositors and lower ECL. However, we foresee intense competitions for depositors may pressure net interest margin (NIM)/NPM.

Establish NEUTRAL Call on Financials Sector

We establish our NEUTRAL view on Financials. We have a BUY call on Bursa (TP: RM11.10) and HOLD call on MBSB (TP: RM 0.80).

Source: BIMB Securities Research - 2 Dec 2024