KEY INVESTMENT HIGHLIGHTS

• 9MFY24's Core NP of RM2,286m was Within/Within our/street forecasts: 80%/80% of full-year forecasts
• Management's tone: Optimistic
• Core themes: (a) Strong NOII growth, (b) Tepid loans growth and flattish CASA, (c) NIM improvement
• Forecasts unchanged
• Downgrade to NEUTRAL | Unchanged TP of RM6.60 | based on an unchanged FY25F P/BV of 0.85x

Results in a nutshell:

▲ 9MFY24's Core net profit (NP) of RM2,286m up by 3%yoy.

Contributed by strong net income expansion of +11.3%yoy to RM6.39b.

This was able to overcome higher OPEX (+8.7%yoy) and loans provisions (+>100%).

▲ 3QFY24's Core NP of RM833m up by 15%qoq. Driven by robust net income growth (+3.9%qoq), coupled with controlled OPEX increase (+1.0%qoq) and lower provisions (-32.4%qoq).

▸ Gross loans grew by -0.2%qoq, coming up to 2.3%YTD. The lower quarter-on-quarter gross loans contraction was due to forex impact from strengthening Ringgit. Translation impact amounted to RM3b.

Normalised for forex showed gross loans growth of +1.2%qoq.

Furthermore, gross loans grew +3.7%yoy.

▸ Deposits grew by -0.8%qoq, coming up to -2.8%YTD.

Impacted by forex, whereby normalized deposits normalized for forex impact saw growth of +0.5%qoq. Nevertheless, CASA fell by -1.3%qoq, and domestic CASA was flattish -0.1%qoq.

▲ GIL moved by +1bps to 1.77%, LLC currently at 71%.

Have a look at:

▲ Strong NOII was the stellar contributor. Total NOII (inclusive Islamic banking) grew +26.4%yoy to RM2.07b. The non-fund-based income growth driven by higher fee income, net forex gain, and net trading and investment income. These grew +15.4%yoy to RM868.4m, +25.3%yoy to RM724.2m and +53.8%yoy to RM391.1m.

▲NIM improvement from liability management. NIM strengthened by +5bps YTD and +2bps yoy to 1.87%. This was due to liability management initiatives. If we include this impact, we will see FX swap uplifting NIM by 11bps to 1.98%.

▸ OPEX contained but higher on year-on-year basis. OPEX grew +1.0%qoq to RM996.7m in 3FY24 which was due to lower to personnel cost (-2.1%qoq to RM586.2m). However, on a year-on-year basis it was still high whereby it grew +9.7%yoy resulting in 9MFY24 OPEX increase of +8.7%yoy. It seems that this was due to higher IT expenses.

Forecasts unchanged.

Key downside risks. (1) NIM compression, (2) cost inflation, (3) gross loans contraction Downgrade to NEUTRAL call: Unchanged GGM-TP of RM 6.60. The TP is based on an unchanged FY25F P/BV of 0.85x. It was an excellent quarterly performance and dividend yield expected to be still excellent. However, due to recent share price performance, we believe that all the positives have been priced in. Hence, our downgrade to NEUTRAL.

(GGM assumptions: FY25F ROE of 9.3%, LTG of 4.0% & COE of 10.3%)

Source: MIDF Research - 2 Dec 2024