ABMB: Solid Financial Performance Driven by Operating Income Growth

The financial institution reported an encouraging set of IQFY26 results, with net profit rising 12.5% year-on-year (YoY) to RM198.7 million. This performance was primarily underpinned by significant growth in operating income and came within analysts’ expectations, representing 25% of the full-year forecast. The annualised Return on Equity (ROE) stood at 10.4%.

Performance Review

Total net interest income (NII), inclusive of Islamic net financing income, increased by 7.4% YoY, attributed to higher loan volumes. However, the net interest margin (NIM) experienced a slight contraction, slipping by 3 basis points year-to-date (YTD) to 2.42%, and 1 basis point sequentially, due to elevated funding costs.

A key driver for the strong performance was the non-interest income (non-NII), which surged an impressive 54.9% YoY. This boost was a result of higher client base fee income, robust treasury and investment income, and an expansion in FX sales, trade fees, and banking services. Additionally, the institution recorded higher FVOCI gains and trading revenue.

Despite a 7.1% increase in total overhead expenses, mainly due to wage inflation and IT-related costs, the cost-to-income (CTI) ratio improved to 45.1% in IQFY26 from 48.0% in FY25. This positive development was driven by effective productivity gains and aligns with the management’s guidance of maintaining the CTI ratio around 48%. The institution also reported a healthy liquidity position, with its liquidity coverage and net stable funding ratios comfortably above regulatory requirements.

Loan growth maintained a healthy pace, accelerating 9.9% YoY to RM62.7 billion, aligning with management’s target of 8-10% for FY26. This growth was broad-based, spanning commercial, corporate, SME, consumer, personal financing, mortgages, and share margin financing. Total deposits also saw a substantial increase of 12.5% YoY, predominantly from fixed deposits (FDs).

Challenges and Outlook

Asset quality experienced mild pressure, with the gross impaired loans (GIL) ratio ticking up slightly to 1.96% from 1.83% in 4QFY25. Net credit cost (NCC) also increased YoY to RM89.7 million, primarily due to higher “business-as-usual” expected credit losses (ECLs) across consumer and commercial segments, though the SME sector saw a notable rise due to staging deterioration from several customers. Management, however, guided for NCC to remain within the 30-35 basis points range for FY26.

Despite these headwinds, management’s outlook remains cautious due to external uncertainties and evolving policy shifts. The institution is committed to its “Acceler8 2027” strategy, progressing across key pillars including digital transformation, SME, consumer, and sustainability initiatives. The bank continues to uphold its key targets, including loan growth of 8-10%, a post-rights ROE of around 10%, a CTI ratio of approximately 48%, and a dividend payout ratio of 40-50%. Sustainability financing initiatives are also on track to achieve their cumulative target by FY27. Management is confident that volume growth and stronger non-NII generation will help mitigate future NIM compression.