MBSB: Financial Performance Misses Expectations, BUY Rating Maintained

A recent investment bank research report indicates that the company’s 9M25 financial performance, while showing an 8% year-on-year increase in net profit to MYR275.9 million, fell short of both the firm’s and consensus full-year expectations, constituting only 57% of projections. The third quarter of 2025 (3Q25) recorded a net profit of MYR95.6 million, marking a 22% year-on-year decline and flat quarter-on-quarter performance.

Performance Review

The primary driver behind this deviation was a significant 11% year-on-year drop in Net Interest Income (NII), largely attributable to a steeper-than-expected 53 basis points quarter-on-quarter compression in Net Interest Margin (NIM) during 3Q25. This compression followed the July policy rate cut and an increased mix of floating rate financing. Consequently, the 9M25 Return on Equity (ROE) of 3.7% lagged behind management’s 5-6% FY25 target. Asset quality also showed a sequential deterioration, with gross impaired financing rising 11% quarter-on-quarter, and financing loss coverage declining to 31% from 35% in 3Q25.

Despite these challenges, the company demonstrated resilience in other areas. Non-interest income saw robust growth of 48% year-on-year, accompanied by disciplined operational expenditure, which remained flat year-on-year for 9M25. Credit costs improved significantly, reducing to 35 basis points in 9M25 from 61 basis points in 9M24. The company’s gross financing expanded 3% quarter-on-quarter and 2% year-on-year in 3Q25, with notable acceleration in key focus sectors such as transport & communications, agriculture, and manufacturing. Deposits growth was also strong, increasing 6% quarter-on-quarter and 8% year-on-year, driven primarily by a substantial rise in Current Account Savings Account (CASA) deposits, which saw a 38% quarter-on-quarter and 63% year-on-year increase. The CASA ratio improved significantly to 14.5% as at 3Q25, up from 9.7% in 3Q24. Capital levels remain healthy, with a CET-1 ratio of 19.2%, comfortably exceeding the system aggregate.

Future Outlook

Looking ahead, the investment bank anticipates a sharp quarter-on-quarter rebound in net profit for 4Q25, driven by an expected recovery in NII. There is potential for NIM to improve in 4Q25, supported by robust financing growth in 3Q25 and proactive pre-funding efforts. The company’s significant capital levels are expected to enable sustained high dividend payouts, offering yields above the sector average. The investment bank maintains its “BUY” recommendation and a target price of RM0.79, incorporating an unchanged 2% ESG premium. No changes to forecasts and target price are being made pending the group’s upcoming results briefing.