KUALA LUMPUR (Feb 25): Kenanga Investment Bank Bhd’s (KIBB) net profit fell 18% to RM32.22 million for the fourth quarter ended Dec 31, 2021 (4QFY21), from RM39.29 million a year ago, on lower contributions from both the stockbroking and investment banking segments during the quarter under review.

This resulted in lower earnings per share of 4.42 sen for 4QFY21, compared with 5.56 sen for 4QFY20.

Revenue for the quarter declined 18.3% to RM226.08 million from RM276.82 million a year ago.

On a quarterly basis, however, the group's net profit improved by 50.3%, from RM21.44 million for 3QFY21, on higher management fee income and net trading and investment income but partially negated by higher overheads.

Still, the investment bank went on to post a record net profit of RM118.39 million for FY21, rising 16% from RM102.08 million for the previous year, mainly due to higher contributions from the investment management business as well as a revaluation gain on private equity investments.

The better earnings performance in FY21 was also backed by steady, albeit lower, contributions from its stockbroking and investment banking divisions compared to FY20.

This was despite a lower revenue of RM891.49 million for FY21, a 8.5% decline from RM973.76 million the year before, mainly due to lower net brokerage but partially mitigated by higher management fee income.

On the back of the impressive performance, the group declared an interim dividend of 10.5 sen per share amounting to RM77.26 million for FY21 — its highest since becoming an investment bank — comprising an interim dividend of four sen per share and a special interim dividend of 6.5 sen per share. The dividend entitlement and payment dates will be determined by the board of KIBB in due course.

On its prospects, the group said with the challenging economic and political sentiments weighing down the market, the equity broking business is expected to face headwinds, exacerbated by the increase in stamp duty on share trading.

"Mitigating this, and to increase and diversify [our] revenue sources, we are rolling out algorithmic trading tools to our clients and traders, as well as foreign share trading via our joint venture, Rakuten Trade Sdn Bhd."

It expects its investment management to further pick up its growth momentum both in profitability and assets under administration as it diversifies into foreign investments and more environmental, social, and governance-focused products, while the investment banking business is expected to benefit from a stronger deal pipeline this year.

"The year 2021 was a year of two halves for the Malaysian capital market. The first half was largely shaped by the same robust momentum that fuelled our bumper year in 2020. The retail-driven strong trading volumes on Bursa Malaysia led to the excellent performance of our stockbroking business,” said KIBB group managing director Datuk Chay Wai Leong in a statement on Friday (Feb 25).

“However, this momentum moderated sharply in the second half of the year as the country was hit by multiple headwinds, including the reintroduction of lockdown measures in the middle of the year due to surging Covid-19 cases.

"The FBM KLCI, which hovered above 1,600 points at the start of the year, slipped below 1,500 points during the second half. The daily average trading value weakened to RM4.1 billion in December from a high of RM10.6 billion in February," he noted.

“Despite the tumultuous year, our stockbroking business continued to contribute the lion’s share of our 2021 bottom line that was further reinforced by the significant strides made by both our asset management and private equity businesses. This enabled us to thrive through the volatilities to deliver a stellar performance that beat the odds — a testimony to the strength of our diversified strategy,” Chay added.

Looking forward, Chay said digital, which has been central in shaping the group's growth journey, will continue to play a pivotal role in powering KIBB's next phase of advancement.

At 3.41pm, KIBB shares were up four sen or 3.2% at RM1.29, giving the group a market capitalisation of RM949.13 million. The stock has risen 11.21% year-to-date.