KUALA LUMPUR: Malaysia Building Society Bhd's (MBSB) net profit rebounded 44.6% year-on-year (y-o-y) to RM91.1mil due to improved operating income and a decline in allowances.
However, the earnings was lower 10% lower than in the immediate preceding quarter owing to higher operating expenses.
"H1FY17 operating income was up 9.4% y-o-y as funding pressure eased, resulting in a net interest-margin improvement (NIM) of 20bps y-o-y to 3.4%. The overall gross loan and financing rose 3.6% y-o-y. Bulk of this was driven by expansion in the corporate loan segment (up 28% y-o-y)," said Affin Hwang Capital Research in its Tuesday report.
It noted that the overall results were within its and market expectations.
On Aug 18.2017, MBSB received the Ministry of Finance's approval of its proposed acquisition of Asian Finance Bank (AFB). However, Affin Hwang Research does not expect the purchase to positively impact MBSB materially given the AFB's Q1FY17 annualised ROE of 1.1%.
"AFB is burdened with a high cost-to-income ratio of 82.5% (Q1FY17) while the estimated net profit margin is thin at 1.7% vs the average banking sector’s NIM at 2.2% to 2.3%," it said.
Affin Hwang Research is ceasing coverage on MBSB as it expects the stock's 2017-2019E ROE to stay below its minimum expectation of a 10% investor's cost of equity despite an improved earnings outlook.
"In order to mitigate credit risks in its books, we understand that MBSB will continue to diversify into asset securitisation programmes, re-price its loans at higher rates and explore
potential fee income in Takaful distribution," it said.
The research house's last target price on MBSB was RM1.25.
Already a subscriber? Log in.
Limited time offer:
Cancel anytime. No ads. Auto-renewal. Unlimited access to the web and app. Personalised features. Members rewards.
Follow us on our official WhatsApp channel for breaking news alerts and key updates!