Kenanga posts RM16.7mil net profit in 2Q

KUALA LUMPUR: Kenanga Investment Bank Bhd is optimistic that its investment banking and listed derivative divisions will deliver favourable results for the remaining of the quarters.

“Despite the challenging market conditions, our stockbroking business backed by 50 years of market experience, remains focused on driving innovation and enhancing accessibility for our valued clients and wider investing community.

“In terms of our Investment and wealth management division, asset under management is poised for further growth in tandem with the expansion of agency force and innovative products offering,” group managing director Datuk Chay Wai Leong said in a statement.

Looking ahead, Kenanga anticipates a moderation in domestic economic growth for the third quarter of 2023, with gross domestic product growth expected to ease to 3.4%, down from an estimated 6.0% in the second quarter of 2023. This marks the lowest level since the third quarter of 2021.

“The deceleration in growth can be attributed primarily to the diminishing low base effect and the complete withdrawal of pandemic stimulus measures as our economy returns to normal.

“This is compounded by the tightening of monetary policies led by the US Federal Reserve to combat inflation, which is anticipated to weigh down growth momentum. This is evident in the relatively weak global commodity prices and the recent three-month contraction on export performance,” Chay said.

In the second quarter ended June 30 (2Q23), Kenanga posted a lower net profit of RM16.7mil, or earnings per share of 2.31 sen against RM18.4mil, or 2.52 sen a year ago.

Revenue, however, rose 12% to RM198.2mil from RM176.9mil last year.

In the first six months, it posted a lower net profit of RM26.9mil on revenue of RM378mil.

Kenanga’s stockbroking division saw its revenue decreased slightly to RM71.7mil in the quarter under review compared to RM72.6mil in the previous corresponding period.

Pre-tax profit (PBT) rose to RM10mil, a 270.4% increase from 2Q22 mainly due to the reversal of expected credit loss (ECL) expenses for margin clients as a result of improvement in share collateral value and repayment from clients.

Kenanga said it maintained its position as one of the largest retail stockbrokers in the market by increasing its retail segment market share from 25.9% in the preceding quarter to 26.3% in 2Q23.

The group’s investment banking division posted higher revenue of RM55.9mil in 2Q23, a 31.2% increase relative to the revenue of RM42.6mil in the same period last year. Lower PBT of RM2.2mil was recorded in 2Q23 compared to the PBT of RM3.2mil in the previous corresponding period.

Investment and wealth management division posted a 13.9% increase in revenue to RM66.2mil in 2Q23 compared to the same period last year, while PBT dipped marginally to RM12.3mil in 2Q23, from RM14mil in 2Q22.

The group’s listed derivatives division saw its revenue increased by 18.0% to RM5.9mil, while PBT jump over three folds to RM1.5mil in 2Q23 against the revenue of RM5mil and PBT of RM411,000 in 2Q22 largely due to the higher interest income generated.

Its money lending and financing division, Kenanga Capital, recorded lower revenue of RM776,000 and a loss before tax of RM64,000 in 2Q23 compared to the revenue and PBT of RM2.2mil and RM257,000 respectively in the same period last year.