• We maintain our BUY call and FV for BIMB at RM4.80/share based on FY18 P/BV of 1.7x, supported by an ROE of 12.8% and cost -to-equity of 9.1%. Our forward P/BV is in line with the stock's 5-year historical average P/BV of 1.74x.

• Management has maintained a loan growth target for 2018 of 8-10%. This is supported by a projection for a non-repeat of corporate loans repayments which have resulted in the group’s loans to expand by only 7.1% in 2017. Excluding 3 business repayments totalling RM1.5bil in 2017, loan growth in the last financial year was circa 10%.

• The group aims to change the mix of absolute amount for expansion of consumer loans in 2018 to a 50% increase in personal financing and 50% growth in mortgage loans (2017: 30% personal financing and 70% mortgage loans). This is to improve its asset yield. Also, it is seeking a RM200mil growth in SME loans in 2018,with the establishment of 10 SME centres nationwide. It has set up the first SME centre in Shah Alam.

• For the first 2 months of 2018, loan growth has been soft with a slow momentum for personal financing while mortgage loan growth has been decent. Should personal financing growth remain slow, the group will look into increasing the duration of its Treasury securities to raise its asset yield.

• In 1QFY18, NIM is expected to trend higher benefitting from the OPR hike of 25bp in January 2018. The majority of the tenure of the group’s deposits is less than 6 months.

• The group’s funding cost is likely to rise in 2HFY18 leading to an increase up to 10bps for2018. This is due to the need to raise its longer term funding to move its net stable funding ratio (NSFR) closer to the regulatory requirement of 100% and also due to higher deposit rates with an increase in intensity of deposit competition coupled with the reprising of deposit rates after the increase in OPR. Recall that the implementation for NSFR has been delayed to no earlier than 1 Jan 2019.All these will offset the positive impact to its NIM from the OPR increase resulting in a flat NIM in FY18.

• 1QFY18 earnings from its insurance subsidiary, Syarikat Takaful, is likely to be strong due to its strategic tie-ups with banks for bancatakaful.

• Day 1 impact of MFRS 9 likely to be better than the 30bps drop to its capital ratio guided earlier. This is due to the potential improvement to the group’s risk weighted assets.

• No change to our forecast for now.

Source: AmInvest Research - 29 Mar 2018