ABMB: Banking Group Delivers Robust Earnings Amidst Market Challenges

A recent research report from Public Investment Bank highlights a strong performance from a leading financial institution, which saw its second-quarter fiscal year 2026 (2QFY26) net profit climb by 8.8% year-on-year (YoY) to RM206.6 million. This result propelled the institution’s first-half fiscal year 2026 (1HFY26) net profit to RM405.3 million, aligning closely with both the investment bank’s and consensus estimates, at 52% and 51% respectively.

Performance Review

The impressive earnings growth was primarily driven by lower pre-emptive provisions and a robust 14.6% YoY increase in non-interest income (NoII). The surge in NoII was attributed to higher banking services fees, offset by reduced card-related expenses. However, net interest income (NII) growth was more modest, increasing by 4.0% YoY, impacted by an unfavourable loan mix and an OPR cut in July 2025. Consequently, the net interest margin (NIM) experienced a 10 basis points quarter-on-quarter (QoQ) decline to 2.32%. Management proactively pre-funded its deposits, locking in more attractive rates and longer tenures, a strategy aimed at stabilising NIM against seasonal year-end deposit competition.

Loans growth, while moderating to 8.1% YoY, remained at the lower end of the management’s 8-10% guidance range and still outperformed the industry’s 5.5% growth in 3QCY25. This growth was largely fuelled by consumer loans, including mortgages, credit cards, and share margin financing, as well as robust SME loan expansion. Deposits outpaced loans, growing by 12.5% YoY, leading to a strong liquidity position, with the loan-to-fund ratio at a healthy 87.3% and a CASA ratio of 39.1%.

Asset quality showed signs of improvement, with the gross impaired loans (GIL) ratio decreasing by 5 basis points QoQ to 1.91%. While SME GIL saw a slight uptick to 2.0%, consumer GIL remained stable at 2.0%. The net credit cost was lower by 1.3 basis points YoY at 23.2bps, benefiting from a recovery from a major corporate borrower. The institution maintained outstanding management overlays at RM130.5 million.

Future Outlook and Recommendation

Looking ahead, Public Investment Bank anticipates that the net interest margin (NIM) will stabilise quarter-on-quarter, supported by active deposit repricing and pre-funding efforts. The institution is expected to achieve an 8% loans growth for FY26F, though a cautious stance is maintained due to anticipated operational challenges for customers facing rising inflationary pressures.

Despite the solid performance, the investment bank maintains a “Neutral” recommendation for the stock, with a target price of RM4.50. The institution also declared an interim dividend of 9.37 sen, translating to a 40% dividend payout ratio. The report notes that loan delinquencies within the consumer and SME portfolios may pick up slightly in the second half of FY26, largely due to ongoing inflationary pressures.