AmBank Research maintains ‘Buy’ call on MBSB

The recommendation was supported by MBSB’s return on equity of 9.6% for its FY22 pegging the stock to a price-book value of 0.8 time


MALAYSIAN Building Society Bhd’s (MBSB) earnings are expected to rise by 29.8% and 8.8% respectively in the financial year 2021 (FY21) and FY22 driven by higher estimates for its Islamic banking income, AmBank Research noted in a recent report.

MBSB’s FY20 net income from Islamic banking operations rose by 22% year-on-year (YoY) due to lower-income attributable to depositors.

The investment bank maintained a ‘Buy’ call on the counter with a higher revised fair value of RM1.10 per share from 78 sen per share previously.

The recommendation was supported by MBSB’s return on equity of 9.6% for its FY22 pegging the stock to a price-book value of 0.8 time.

MBSB recorded a net profit of RM96.84 million in its fourth-quarter ended Dec 31, 2020 (4Q20), down 72.8% YoY from RM356.69 million in the same period last year due to higher loan impairment allowances.

Revenue dropped 4.1% YoY in the quarter to RM752.17 million against RM784.14 million in 4Q19.

For the whole financial year, MBSB’s net profit came in lower at RM269.32 million, down 62.4% from RM716.9 million in 2019 dragged by higher impairment losses and modification loss as a result of financing moratorium granted to customers in 2020.

The modification loss for the group last year stood at RM504.75 million due to the blanket automatic moratorium.

Revenue increased 4.4% YoY to RM3.15 billion from RM3.01 billion. In a Bursa filing last month, the group said its total assets fell by RM2.27 billion or 4.48% from RM50.71 billion in FY19 mainly due to decline in interbank placements. Deposits declined to RM33.88 billion from RM35.89 billion in FY19, while gross impaired financing ratio stood at 5.3% last year, a marginal deterioration from 5.19% in FY19.

MBSB Bank Bhd, which is the biggest subsidiary in the group, had total assets of RM48 billion in 4Q20, accounting for 99% of total assets of the group, while the equity accounts for 69.4% of total group equity.

“We gather that the group still has an unutilised or carried a for-ward stock of business financing totalling RM1.7 billion.

“The group targets to disburse RM2.7 billion of loans in 4Q20, bringing the full-year disbursements to RM8.8 billion, comprising largely drawdowns of trade finance facilities,” said AmBank Research analyst Kelvin Ong in a note recently.

Meanwhile, MBSB Bank president and CEO Datuk Seri Ahmad Zaini Othman (picture) shared that the bank anticipates capital injections over the next three years to further strengthen the group’s capital position.

“Aside from that, we will work on growing our fee-based income, such as wealth management, and lowering our gross impaired financing ratio” he said.

MBSB will also continue to focus its businesses in selected sustainable sectors and adopting emerging technologies.

It noted that various new measures and an extended moratorium due to the pandemic is expected to impact profitability this year, therefore, it will constantly monitor customer collections and risks to ensure sustained profits.

MBSB’s share price closed 1.5 sen or 2.16% higher at 71 sen yesterday valuing the company at RM4.92 billion.