ABMB: Earnings Beat Expectations on Strong Growth, Target Price Raised

A recent investment bank research report highlights impressive financial performance, with net profit for the third quarter of fiscal year 2026 (3QFY26) surging 15.3% year-on-year to RM215.2 million. The nine-month fiscal year 2026 (9MFY26) net profit of RM620.5 million was notably in-line with both the bank’s internal estimates and consensus expectations, accounting for 80% and 78% respectively.

Performance Drivers

The strong performance was primarily driven by improvements in both net interest income (NII) and non-interest income (NoII). Loans growth demonstrated robust momentum, expanding 7.9% year-on-year and outpacing the broader banking system’s 4.8% growth. This was largely fueled by significant increases in consumer mortgage loans (+10.5% YoY), SME loans (+6.8% YoY), and commercial loans (+15.1% YoY). Over a quarter-on-quarter basis, loans grew by 2.9%.

Non-interest income also saw a substantial increase, rising 45.3% year-on-year to RM372.3 million. This surge was mainly attributed to strong growth in treasury and investment income, alongside banking services fees. Net interest margin (NIM) improved by 2 basis points quarter-on-quarter to 2.34%, benefiting from a lower cost of funds following a deposit repricing post-Overnight Policy Rate (OPR) cut. Furthermore, the bank maintained a healthy asset quality, with the gross impaired loans (GIL) ratio improving by 2 basis points quarter-on-quarter to 1.89%.

Challenges and Efficiencies

Despite the strong growth, the report noted persistent deposit competition. While overall deposit growth outpaced loans growth at 10.4% year-on-year, primarily driven by a 15.3% rise in fixed deposits, this led to a decline in the Current Account Savings Account (CASA) ratio to 38% from 39.4% in 3QFY25. Isolated pockets of stress were observed among smaller SMEs due to increased cost pressures, contributing to a slight rise in net credit cost by 0.1 basis points to 30.7 basis points, although this was largely offset by a significant corporate recovery.

Operational efficiencies were evident as the 9MFY26 Cost-to-Income Ratio (CIR) improved marginally by 1 basis point to 46.7%, reflecting effective cost management.

Future Outlook and Recommendation

Looking ahead, the investment bank has revised its earnings forecast upwards by 2-4% for FY26F-28F, citing the sustained strong momentum in SME and consumer loans. Management has reiterated its loan growth target of 8-10% for FY26F, emphasizing asset quality over volume. The NIM guidance has been revised to 2.34-2.37%, with expectations for solid NIMs going forward due to active deposit repricing and the absence of year-end funding competition.

The net credit cost guidance for FY26 has also been adjusted to 30-33 basis points (from 30-35 basis points) in light of improving macroeconomic indicators. A normalization in non-interest income growth is anticipated, with wealth management income offsetting moderating treasury income.

Considering these factors, the investment bank has maintained a BUY recommendation with a revised Target Price of RM0.25, representing a potential upside of 25.0% from the last traded price of RM0.20.