Results

• Results in line… BIMB’s 2Q17 earnings of RM136m (-5% YoY, -10% QoQ) took 1H17 net profit to RM287m (+3% YoY). The results were broadly in line with expectations, accounting for 47.9% and 48.8% of HLIB and consensus respectively.

Deviations

• None.

Dividend

• None.

Highlights

• QoQ… Net profit fell -10% to RM136m, derailed by 1) higher loan-loss-provision (LLP) amounting to -RM25m (+183%) and 2) lower income from takaful of RM172m (-13% QoQ).
• YoY… Net profit dipped by -5% to RM136m emanated from higher expenses (+7%) and income attributable to depositors (+15.3%) respectively. However, it was offset by higher net financing income amounting to RM769m (+6.6%)
• YTD… Net profit grew by +3% YoY to RM287m. Lower LLP by -49% YoY and higher takaful income by +6% was offset by higher distributable income to depositors by +10% YoY to RM593m.
• Financing… Bank Islam’s financing growth rose at a respectable pace of +11.2% YoY, mainly came from household financing. Several business loans also gained strong momentum namely transport (+171.2% YoY) and education, health and other (+11.2% YoY).
• Deposits… Deposits (including investment accounts) expanded by 13.4% YoY to RM48bn. CASA ratio continued to improve to 31.6% from 29.4% in 1Q17 whilst financing to deposit ratio (including investment account) was largely unchanged at 86.9%.
• Asset quality… Absolute NPL edged higher by +7.7% YoY but was still within manageable level with weakness seen in household sector which rose +25% YoY. Gross impaired ratio rose marginally to 1.0% from 0.9% in 1Q17. Whilst financing loss coverage was still respectable at 160.3%.

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 proli feration of Islamic financial services. We remain positive on a decent showing in financing growth in FY17.

Valuation

• We raise our TP to RM5.00 as we roll over our valuation into FY18. Our TP is derived using Gordon-Growth valuation model which comprises (i) WACC of 7.2% and (ii) ROE of 15%. Maintain BUY rating.

Source: Hong Leong Investment Bank Research - 29 Aug 2017