Results

• FY16 results slightly below? 4Q16 net profit was lower at RM139.5mil (-13.8% YoY, -1% QoQ), bringing FY16 net profit to RM558m (+2% YoY). FY16 net profit was slightly below HLIB estimate (92%) but broadly in line with consensus (96%).

Deviation

• Higher LLP (RM92.1m) and zakat (RM13.5m).

Dividends

• No dividend was declared. YTD dividend stood at 13 sen, or 3% yield.

Highlights

• 4Q16: Net profit was lower at RM139.5m (-13.8% YoY, -1% QoQ) largely due to a decline in finance income and hibah of RM17.1m (-59% YoY, -59% QoQ).
• FY16: Net profit grew to RM559m (+2% YoY) driven by income derived from investment of depositors funds, income derived from investment account funds and wakalah performance incentive that grew by +6.2% YoY, +509% YoY, +1232% YoY. However, this was offset by higher financing loss provision of RM92.1m (+33% YoY).
• Financing growth for FY16 surged to 14.2% YoY to RM39.2bn, well ahead industry average, underpinned by all business segments namely consumer (+13% YoY), commercial (+17.1% YoY) and corporate (+16.5 YoY). Moving forward, management guides to skew its financing towards corporate segment, albeit at marginal pace.
• Lower credit cost in 4Q16 (due to recoveries) cushioned the overall credit cost weakness in FY16. That said, credit cost for FY16 was still manageable at 25bps given lack of recoveries. For FY17, management cited a manageable 25bps credit cost while maintaining higher CA allowance due to loan growth expansion. Financing loss coverage still hovered at high level of 175.4%.
• Deposit growth outpaced industry average, rising 5.4% YoY chiefly from fixed deposits (+12.8% YoY) that drove net financing down by 3bps YoY to 2.74% in FY16. FDR in FY16 (exclude investment acc.) was flat at 78.5%. Moving forward, BIMB guided FDR to surge to around 85%, translating to a potential strong financing growth in FY17.

Risks

• New regulatory on Investment Account, economic slowdown and high household debt.

Forecasts

• We lower our FY17-FY19 earnings forecasts by 7%, 5.4% and 10.8% respectively as we impute larger spread compression.

Rating

BUY (↔)

• BIMB offers investors exposure to Islamic finance, both banking and takaful industry. Given the nature of under- penetration for both industries in Malaysia, we are positive that BIMB is in the pole position to benefit from further proliferation of Islamic financial services. Despite the slight earnings disappointment, we remain positive on a decent showing in financing growth in FY17.

Valuation

• We lower our TP to RM4.86 (from RM5.00) as we ascribe lower ROE to reflect earnings forecast revision. Our TP is derived using Gordon-Growth valuation model which comprises (i) P/B of 1.9x and (ii) ROE of 11%. Maintain BUY rating.

Source: Hong Leong Investment Bank Research - 28 Feb 2017