Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a revised FV of RM3.90/share (previously: RM3.70/share) based on a higher derived SOP valuation as we roll forward our valuation for Bank Islam to FY21, pegging the bank to a P/BV of 1.1x. We tweak our FY20/21 earnings by -2.3%/- 4.9% to reflect a lower income contribution from the takaful business and a refinement in credit cost estimate to 0.30% from 0.35% previously.

• The group reported a net profit of RM209mil (+3.3% YoY) in 1Q20. 1Q20 saw higher net income (before direct expenses and provisions) of 5.4% YoY to RM848.6mil, partially offset by higher allowances for loan losses and overhead expenses. Earnings were within expectations, making up 26.5% and 28.0% of our and consensus estimate respectively.

• Bank Islam (BI), the 100% subsidiary of BIMB, recorded a decline in fund-based income by 1.8% YoY or RM14.3mil in 1Q20 due to two OPR cuts of 25bps each on Jan and Mar 2020. Net income margin of BI fell 11bps QoQ to 2.38%. Meanwhile, the subsidiary’s non-fund based income expanded by RM37.8mil. This was contributed by an increase in investment income.

• BI’s gross financing accelerated to 9.3% YoY from 8.1% YoY in the preceding quarter (net financing growth: 9.5% YoY), higher than the industry’s expansion of 4.0% YoY. This was mainly supported by consumer and corporate loans of 5.9% YoY and 48.0% YoY respectively. Consumer loan growth was underpinned by an expansion of house and personal financing of 7.6% YoY and 6.4% YoY respectively. Meanwhile, growth in outstanding credit card receivables was subdued while that of vehicle financing slipped 14% YoY.

• Growth of CASA and transactional investment account picked up pace at 5.2% YoY. This raised the CASA ratio to 35.9% in 1Q20 from 32.8% in 4Q19.

• With a growth in operating expenses of 7.7% YoY, JAWs was a negative 2.3% for 1Q20. CI ratio was slightly higher at 56.7% in 1Q20 vs. 55.6% in 1Q19.

• The group’s gross impaired loan balances declined by 1.4% QoQ or RM5.9mil to RM427mil in 1Q20.

Source: AmInvest Research - 29 May 2020