The Group reported another relatively decent set of financials with a 2QFY21 net profit of RM1.96bn (+108.4% YoY, -18.0% QoQ) making up a cumulative 1HFY21 net profit of RM4.35bn (+46.4% YoY). Still exceeding our and consensus expectations at 57% and 55% of full-year numbers respectively, we leave estimates unchanged as we remain conservative amid ongoing uncertainties in its key markets. Fund-based income is still benefitting from lower cost of funds and as Group overheads continues to be contained. 1HFY21 loan loss provisions were significantly lower (-41.8% YoY), in spite of top-ups for existing impaired accounts and additional overlays for the retail portfolio (in 1QFY21). While near-term prospects of the Group may still be weighed by pockets of asset quality challenges, we continue to like the Group’s longer-term prospects, driven by its M25 initiatives. Our Outperform call is affirmed with an unchanged target price of RM9.30.
- Net fund based income for 1HFY21 was higher at RM9.50bn (+16.1% YoY) as lower funding costs continued to underpin improvements. CASA ratio is at 45.2% (Jun-20: 40.2%), with healthy growths in Malaysia (+18.6% YoY) and Singapore (+28.1% YoY). Net interest margin (NIM) has expanded an annualized 24bps YTD June, and expected at between 10bps and 15bps this FY21. NIM improvements may possibly be dampened by modification losses.
- Net fee based income for 1HFY21 was lower at RM3.50bn (-16.5% YoY), impacted by lower investment disposal gains (-54.6% YoY) and marked-to market losses (-RM1.01bn) on its derivative instruments. A 24.4% YoY improvement in its core fees (commissions, service charges, fees) failed to mitigate the weakness however. The Group is maintaining its priority on leveraging fee-based opportunities in wealth management, global markets, investment banking, asset management and insurance. Focus will also be on accelerating product rollouts on its digital platform.
- Loans growth (+4.1% YoY, +1.3% QoQ) is steady YoY, though is expected to moderate, particularly in Malaysia as growth is hamstrung by weaker economic conditions from tightened (and prolonged) containment measures. While strong recovery is seen in Singapore, Indonesia may also be a near-term drag.
- Asset quality will remain a priority given ongoing uncertainties in some of its key markets. Management is maintaining its credit charge-off rate of between 70bps and 80bps level for FY21 despite steady numbers seen as at 1HFY21. While a noticeably higher 27.1% (May: 16.9%) of its Malaysian book is now under repayment assistance and relief programmes, levels of missed payments is negligible, suggesting that asset quality remains healthy.
Source: PublicInvest Research - 27 Aug 2021