Results

• In line with expectations. BIMB started FY17 on a stronger note with 1Q17 net profit soaring to RM151m (+12% YoY, +8% QoQ), which is in line with HLIB and consensus estimates, accounting for 25.7% and 25.2% respectively.

Deviations

• None.

Dividend

• None.

Highlights

• YoY… Net profit advanced by 12% YoY to RM151m underpinned by lower loan-loss-provision of RM8.7m (-75% YoY), chiefly from lower CA provision of RM29m (-51.5% YoY). In addition, takaful income surged strongly to RM199m (+10% YoY) as a result of higher net earned contribution of RM398m (+10% YoY) and other income of RM99.1m (+11.5% YoY). Income from investment account surged to RM52.4m (+356% YoY) due to higher mudharabah investment account.

• QoQ… Net profit grew by 8% QoQ to RM151m despite lower income from depositor funds by 2% and higher loan loss-provision by 113% QoQ. The key reason of higher net profit was due to the income from takaful segment which surged 22% QoQ on the back of higher other income by 41% QoQ.

• Financing base… Despite lower guidance, BIMB maintained its strong financing growth, rising by 12.6% YoY and 1.4% QoQ, driven by household (+12.5% YoY), transport, storage and communication (+180% YoY). By type of customer, loans to SME and individuals were the key drivers, rising 16% YoY and 13% YoY respectively.

• Deposits… slipped by 5% QoQ due to the decline in both CASA and fixed deposits by 6.3% QoQ and 1.9% QoQ. Nevertheless, the fall in fixed deposits outpaced that of CASA, which led to CASA composition rising by 100bps to 31.9%. Financing to deposit ratio weakened in 1Q17 as it spiked to 91.9% from 86.1% in 4Q16.

• Asset quality… improved further to 0.95% as BIMB managed to contain NPL from household sector at 0.55% vs. 0.57% in 4Q16 and is poised to drop further throughout FY17.

Risks

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

Forecasts

• Unchanged.

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. We remain positive on a decent showing in financing growth in FY17.

Valuation

• We maintain our TP at RM4.86 . Our TP is derived using Gordon-Growth valuation model which comprises (i) WACC of 7.6% and (ii) ROE of 11%. Maintain BUY rating

Source: Hong Leong Investment Bank Research - 17 May 2017