Results

• Results in line… BIMB’s 3Q17 net profit of RM183m (+30% YoY, +35% QoQ) lifted 9M17 net profit to RM470m (+12% YoY). The results were in line with HLIB and consensus, making up 78.6% and 79.9% respectively.

Deviations

• None.

Dividend

• Declared higher dividend of 14sen, equivalent to 43% payout and 3% yield.

Highlights

• QoQ… Despite weak topline growth (-4%), earnings was offset by higher recoveries, which lifted LLP to RM43.7m. Bank Islam performance was stronger at PBT of RM223m while takaful segment was flattish.

• YoY… On PPOP, income fell by -9% derailed by flat income from Bank Islam and takaful segment. Higher recoveries lifted LLP, and led net profit to RM183m (+35% YoY).

• 9M17… Net profit grew by +12% YoY to RM470m, as flattish income (+1% YoY) was cushioned by lower LLP of RM10.2m (-112%) despite weakness seen in opex that rose by +4% YoY to RM528m.

• Financing… Bank Islam’s financing growth moderated to 8% YoY (in line with management guidance) and -1% QoQ to RM470bn as we believe Bank Islam experienced lumpy corporate repayment in 3Q17. Nevertheless, it HH segment drew decently at 11% YoY, driven by mortgage and personal financing.

• Deposits… Deposit growth (including investment accounts) moderated to only 5.2% YoY (-3.8% QoQ). Nevertheless, net financing margin expanded 2bps QoQ to 2.59%, whilst financing to deposit ratio (including investment account) up ticked to 87.7% from 86.9%.

• Asset quality… Absolute NPL rose 3.8% QoQ, weakening GIL to 1.07% from 1.0% in 6M17, as Bank Islam experienced weakness in construction (+58.4% QoQ). Financing loss coverage was still respectable at 148.4%.

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 TP at RM5.00. Our TP is derived using Gordon-Growth valuation model which comprises (i) WACC of 7.3% and (ii) COE of 11%. Maintain BUY rating.

Source: Hong Leong Investment Bank Research - 4 Dec 2017