Results

• Results in line. BIMB’s 4Q17 net profit of RM150m (+7% yoy) lifted FY17 net profit to RM620m (+11%). The results came in within expectations, accounting 100% and 103.6% of HLIB and consensus net profit forecasts.

Deviations

• None.

Dividend

• No dividend was declared in this quarter. FY17 dividend stood at 14sen, equivalent to 43% payout and 3% yield.

Highlights

• 4Q17. Stronger net profit of RM150m was attributed by stronger Takaful contribution of RM58.7m (+36% yoy) whilst Bank Islam earnings eased marginally by 1.6% yoy to RM175m

• FY17. Both Bank Islam and Takaful PBT rose by 6.5% yoy and 14.8% to RM767m and RM256m, whilst BIMB managed to contain loan loss provision from going north.

• Financing. Financing growth continued to moderate to 7.1% yoy and missed management target at 8% yoy, but nevertheless, still outpaced industry average at 4.1%. On the bright side, household financing rose above industry at 11% yoy which offset the moderation in the corporate segment.

• Deposits. Deposit growth (including investment accounts) grew strongly on qoq basis by 10%, chiefly from growth in CASA and fixed deposits. As a result, Bank Islam’s financing to deposits ratio improved to 91.8% from 96.5% in 3Q17, driven from stronger deposits.

• Asset quality. Absolute NPL decelerated by -8.7% qoq backed by improvement across various segments, especially in the finance, insurance and business, which NPL decreased to low of 0.2% from 3.5% in 3Q17. Financing loss coverage was still respectable at 157%.

Risks

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

Forecasts

• Unchanged.

Rating

BUY ( ↔ )

• Despite moderation in the loan growth, we believe Bank Islam remains on the edge of the domestic Islamic finance. Additionally, Takaful segment continues to deliver healthy results given its conservative stance.

Valuation

• We maintain TP at RM4.90. 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 - 1 Mar 2018