MBSB’s 1QFY12 total income and earnings were within our
expectations, accounting for 22.7% and 22.0% of
consensus and our forecasts
respectively. Asset quality improved, as evidenced by its improved net impaired
loans ratio of 7.3% in the current quarter versus 8.5% in the preceding period.
We expect the group’s sequential performance to be better supported by its
corporate and retail businesses. Maintain BUY, with an unchanged fair value
(FV) of RM2.70, premised on 2.6x FY12 PBV.
Robust personal
financing numbers. MBSB reported a
1QFY12 net profit of RM79.4m, up 16.3% y-o-y but down 5.3% q-o-q. This was
within our expectations, accounting for 22.0% of our forecast, largely due to
better y-o-y net interest income (+16% y-o-y, +23.7% q-o-q) and Islamic banking
income (+74.4% y-o-y, +14.6% q-o-q). These helped to offset the weaker
non-interest income (-56% y-o-y, -6.7% q-o-q) as well as higher operating
expenses (+19.1% y-o-y, +5.2% q-o-q).
Fee-based income
plunges 57.0% y-o-y, 6.7% q-o-q. We gather from management that the group’s
fee-based income fell due to promotion transfer packages in such as MBSB
Exec-i, which was the group’s best-selling product for February and March. We gather
that the product, which aims to attract non-existing customers to refinance
their loans with MBSB, fetched lower NIMs and where MBSB absorbed customers’
stamping fees and bancassurance charges, which resulted in lower fee-based
income. Nonetheless, we expect the company’s fee-based income to normalize in
the next two quarters as the Exec-i will no longer be offered after the end of
June.
Asset quality
improves. Despite the strong loans growth, MBSB’s net impaired loans ratio
improved from 8.5% in the previous quarter to 7.3% in the quarter under review.
So did its cost-to-income ratio (CIR), which was better at 20.8% in 1QFY12
compared with 22.4% in the prior quarter. We expect the CIR to edge higher to
25.0% as the group rolls out its new core Banking System (CBS), for which the
first of two phases will take effect in 3Q12. The CBS is aimed at enhancing
MBSB’s business capabilities. Meanwhile, total deposits rose
28.4% y-o-y and 12.1% q-o-q while
the loan-to-deposit ratio (LDR) climbed
to 114.5% from 109.7% in the preceding quarter. This reinforces our view that the
group will need to strengthen its deposit-taking franchise to sustain its
aggressive loans growth. We are forecasting for an LDR of 107% this year.
Maintain BUY. We are maintaining our BUY call
as we expect MBSB’s sequential performance to be well supported
by both its corporate and retail businesses, especially personal financing. Our
FV is unchanged at RM2.70, pegged to 2.6x PBV, assuming a 4% growth rate, COE
of 11% and ROE of 23.7%.
Source: OSK188
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