ABMB: Strong First-Half Performance Exceeds Expectations, Target Price Raised

A prominent investment bank has highlighted a robust first-half performance for a leading Malaysian financial institution, with net profit rising significantly and key operational metrics showing improvement. The solid results, driven by strong operating income and disciplined cost control, have led the bank to reiterate its “BUY” recommendation and raise its target price.

Performance Review

For the first half of FY26, the financial institution reported an encouraging net profit increase of 10.6% year-on-year, reaching RM405.3 million. This stronger performance was primarily anchored by higher operating income, bringing the results within expectations, representing 51% of the full-year forecast. The annualised Return on Equity (ROE) stood at 10.1%. An interim dividend of 9.37 sen per share has been proposed, reflecting a payout of approximately 40%.

The bank saw its total net interest income (NII) climb 4.0% year-on-year, primarily due to higher loan volumes. Non-interest income (non-NII) was a significant contributor, surging by 30.7% year-on-year, propelled by an increase in client base fee income and treasury and investment income, notably from higher fair value through other comprehensive income (FVOCI) gains.

Despite an 8.1% year-on-year increase in total overhead expenses, mainly due to higher personnel and IT costs, the cost-to-income (CTI) ratio showed a slight improvement to 46.4% from 46.5% a year ago, comfortably within the management’s guidance of around 48%.

However, the net interest margin (NIM) experienced a compression, slipping by 8 basis points year-to-date to 2.37%, with a sequential contraction of 10 bps to 2.32%, partly attributed to the OPR cut in July. While loan growth accelerated at a healthy pace of 8.1% year-on-year, aligning with management’s target range of 8-10% for FY26, corporate banking loans notably contracted by 4.1%. Asset quality remained sound, with the gross impaired loans (GIL) ratio strengthening to 1.91% from 1.96% in the previous quarter, driven by improvements in the consumer and corporate segments. Net credit cost, however, climbed due to higher BAU Expected Credit Losses (ECL), though partially offset by pre-emptive corporate recoveries.

Future Outlook and Strategy

Management maintains a cautiously optimistic view on the macroeconomic outlook and is committed to prudent growth targets for the remainder of FY26. While most key metrics are tracking broadly within full-year guidance, certain areas, such as loan growth and NIM, are trending towards the lower end of expectations. The outlook for the second half appears more upbeat, with potential upside stemming from non-NII, particularly in FX and capital-market volatility, as well as client fee-based income.

Strategically, the bank will continue to prioritize quality-driven expansion, deepen customer penetration, and enhance productivity to support sustainable non-NII growth. Operating expenses are expected to moderate in the second half, especially concerning marketing and branding spend. Investments in technology and workforce remain core, with people-related costs potentially easing as digitalization drives efficiency gains.

Analyst’s Recommendation

In light of the strong first-half performance and positive outlook, TA Securities has reiterated its “BUY” recommendation for the financial institution. Rolling forward the valuation base year to FY27, the investment bank has raised its target price to RM5.30 from RM4.90, representing a 14.5% upside from the last traded price of RM4.63. The revised valuation is based on an implied price-to-book value (PBV) of approximately 0.94x, utilizing the Gordon Growth Model.