BIMB’s 4Q22 earnings rose 9% YoY due to lower allowances for bad financing. Also, financing growth stayed robust. However, NFM compressed and GIF ratio saw an uptick. Overall, results were within estimates and hence, forecasts were unchanged. We still find valuations inexpensive, where the stock is currently trading near to -2SD. As such, BIMB is one of the rare remaining banking stock to trade at such depressed level. Also, its structural long-term growth prospects are bright and intact. Retain BUY and GGM-TP of RM3.00, based on 0.91x FY23 P/B.

Within estimates. BIMB posted 4Q22 earnings of RM126m (-12% QoQ, +9% YoY on a core basis, ex-mod loss), bringing FY22 sum to RM492m (-14% YoY). This came in within expectations, making up 100-102% of our and consensus full-year estimates.

Dividend. Declared 2nd interim DPS of 3.4sen (vs 4Q21: nil; FY22: 13.8sen vs FY21: 10.93sen). Ex-date: TBD.

QoQ. Net profit fell 12% due to higher opex (+10%) and impaired financing provision (+52%). Also, net financing margin (NFM) compressed 4bp but was more than offset by the better gross financing (+6.2%) and non-financing income growth (+20%).

YoY. The lower provision for bad financing (-66%), lifted bottom-line by 9%. However, negative Jaws (opex growth outpaced total income growth by 4ppt) capped earnings from expanding quicker.

YTD. Bottom-line decreased 14% due to weaker non-financing income (-12%), higher opex (+10%), and effective tax rate (+10ppt).

Other key trends. Both financing and deposits growth remained firm at +11.4% YoY (3Q22: +9.1%) and +10.9% YoY (3Q22: +12.2%) respectively. That said, financing-to deposit ratio climbed up 2ppt sequentially to 88%. As for asset quality, gross impaired financing (GIF) ratio spiked 7bp QoQ to 1.27% due to weakness at the household and mining segments.

Outlook. We expect sequential NFM to shrink given: (i) repricing of matured deposits, (ii) CASA being utilized and substituted to FD, along with (iii) still stiff price competition for FD. Besides, financing growth is seen to moderate due to a softer domestic macro environment. Moreover, GIF ratio is likely to climb but we are not overly worried as we believe BIMB is better equipped vs prior slumps; the large pre-emptive provisions built up in FY20-21 to battle Covid-19 pandemic woes and latency in credit loss from OPR hikes, act as robust buffer to cushion for any asset quality weakness in the short-term.

Forecast. Unchanged since 4Q22 results were in line.

Retain BUY and GGM-TP of RM3.00, based on 0.91x FY23 P/B with assumptions of 9.0% ROE, 9.6% COE, and 3.0% LTG. This is beneath its 5-year mean of 1.05x but in line with the sector’s 0.85x. The discount is fair since its ROE output is 2ppt below its 5-year average. 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 - 28 Feb 2023