BIMB’s 3Q22 earnings jumped 22% QoQ due to robust total income growth and lower impaired financing allowances. Also, financing growth remained robust. However, GIF ratio saw an uptick. Overall, results were within expectations and thus, forecasts were unchanged. We still find valuations inexpensive, where the stock is currently trading near to -2SD. In turn, this makes BIMB one of the rare remaining banking stock to trade at such depressed level. Also, structural long term growth prospects are bright and intact. Retain BUY rating and GGM-TP of RM3.00, based on 0.89x FY23 P/B.

Within estimates. BIMB posted 3Q22 earnings of RM143m (+22% QoQ, +41% YoY), bringing 9M22 sum to RM366m (-20% YoY). This came in within expectations, making up 74-76% of our and consensus full-year estimates.

Dividend. None declared as BIMB only divvy in 4Q.

QoQ. Net profit jumped 22%, thanks to robust total income growth (+12%) and lower impaired financing provision (-26%). At the top, gross financing grew 2.3% while non financing income rose 24%. However, the escalation in opex (+9%) capped earnings from growing faster.

YoY. Again, the increase in total income (+22%) and lower provision for bad financing (-27%), lifted bottom-line up by 41%.

YTD. Earnings declined 20% due to weak non-financing income (-17%), higher opex (+12%), financing loss allowances (+28%), and effective tax rate (+11ppt).

Other key trends. Both financing and deposits growth held firm at +9.1% YoY (2Q22: +8.0%) and +12.2% YoY (2Q22: +13.6%) respectively. That said, financing-to-deposit ratio was unchanged sequentially at 86%. For asset quality, gross impaired financing (GIF) ratio ticked up 6bp QoQ to 1.20% due to weakness at the household, transport related, and mining segments.

Outlook. We see smaller sequential NFM expansion given: (i) bulk of the FD typically will be repriced 6-9 months from the first OPR hike (kick-started in May-22), (ii) CASA being consumed and substituted to FD, along with (iii) price competition for FD. That said, financing growth is seen to chug along for now. Separately, GIF ratio is likely to rise but we are not overly worried, since BIMB has already made heavy pre-emptive provisioning in FY20-21 to cushion this impact. Moreover, FY22-23 NCC assumption built in by both us and consensus remained fairly elevated (above the normalized run rate but below FY20-21’s level).

Forecast. Unchanged since 3Q22 results were within expectations.

Retain BUY and GGM-TP of RM3.00, based on 0.89x FY23 P/B with assumptions of 8.9% ROE, 9.6% COE, and 3.0% LTG. This is beneath its 5-year mean of 1.12x and the sector’s 0.90x. The discount is fair considering its ROE output is 2ppt/1ppt below its 5-year average/industry. Overall, we find valuations inexpensive, where the stock is currently trading near to -2SD. In turn, this makes it one of the rare remaining banking stock to trade at such depressed level. Also, structural long-term growth prospects are bright and intact. Thus, we believe the risk-reward profile is skewed to the upside.

Source: Hong Leong Investment Bank Research - 1 Dec 2022