KEY INVESTMENT HIGHLIGHTS

• 6MFY25's Core NP of RM1,001m was Within/Within our/street forecasts: 55%/54% of full-year forecasts
• Management's tone: Optimistic
• Core themes: (a) robust NII with NIM improving, (b) lower provisions supported NP growth, (c) Deposits contraction
• Forecasts no change
• Declared interim dividend of 10.6sen (vs. 6sen in 1HFY24)
• Maintain NEUTRAL | Unchanged TP of RM5.18 | based on an unchanged FY26F P/BV of 0.80x

Results in a nutshell:

▲ 6MFY25's Core net profit (NP) of RM1,001m up by +22%yoy.

Main contributor was lower provisions which fell -72%yoy to RM57m. NII (including Islamic banking) was also a supporting factor as it grew +7%yoy to RM1.76b.

▸ 2QFY25's Core NP of RM501m flat at +0%qoq. Positive JAWS in the quarter (2%) leading to higher PPOP (+6%qoq to RM698m). However, higher provisions (>100%qoq) moderated the growth.

▸ Gross loans grew by +1.4%qoq, coming up to +0.3%YTD.

Gross loans growth has been muted this financial year, although it is better on a quarterly basis. This was due to resetting of retail banking portfolio where auto financing, personal financing and retail SMEs loans book contracted -7%YTD, -11%YTD and -3%YTD respectively.

▼ Deposits grew by +0.6%qoq, fell by -4.3%YTD. Contributed by lower CASA (-13%YTD to RM46.1b).

▲ GIL improved by -3bps to 1.67%, LLC currently at 87%. Lower impaired loans on business banking loans book.

Have a look at:

▲NII improved, lifted by NIM expansion. NIM expanded by +14bps yoy to 1.93% in 1HFY25 and 2QFY25 NIM expanded +7bps qoq to 1.96%. The improvement of NIM was due to growth in the business banking loans book +5%qoq and +7%YTD to RM40.8b. We understand that this segment provided better pricing. Furthermore, COF optimisation was also a factor, more precisely, liability management (more debt market funding, revamping deposit composition etc.).

▸ Higher expenses but only slightly and manageable. OPEX increased by +5%yoy in 1HFY25. This was due to higher personnel cost, computerisation cost and professional fees ▼ Deposits fell with lower CASA a contributor. Non-retail and retail CASA fell -15.3%YTD to RM26.5b and -8.8%YTD to RM19.6b respectively. Meanwhile, FD increased +1%YTD. The fall in deposits may pressure to further increase FD especially as seasonal deposits coming up in 3QFY25. However, NIM improvement was due to better COF which suggest FD not priced aggressively at this juncture, besides liability management.

Forecasts unchanged. Since 1HFY25 results were within expectations, we maintain our earnings estimates.

Key downside risks. (1) Further decline in CASA and deposits competition, (2) Higher-than-expected credit costs, (3) Weaker-than-expected NOII performance Maintain NEUTRAL call: Unchanged GGM-TP of RM 5.18 (from RM5.18). The TP is based on an unchanged FY26F P/BV of 0.80x. We maintain our NEUTRAL call as believe all the positives have been priced in.

(GGM assumptions: FY26F ROE of 9.1%, LTG of 3.5% & COE of 10.5%)

Source: MIDF Research - 28 Nov 2024