Period   1Q12

1QFY12 PAT of RM64.9m was marginally above the consensus' forecast (29%) but was within ours (25%). 

Dividends  No dividend was proposed.

YoY, fund based incomes grew 16% thanks to a strong financing growth  of 19% to reach a total financing portfolio of RM15.3b. Its balance sheet continued to expand at a fast pace as the financingto-deposit ratio rose to 57.3%, up from 50.1% in 4Q11.     

However, QoQ, the 1Q12 fund-based incomes contracted 4.4% to RM247m as financing margin was squeezed by 17bps although there was a healthy 5.0% financing growth in 4Q12.  

We note that non-fund based incomes were strong in 1Q12. The non-fund based incomes of RM202.4m (+6.0% QoQ and +33.0% YoY) contributed 45% of the total income in 1Q. 

We see improving asset qualities with the gross impaired financing falling to RM351m with the gross impaired ratio improving to 2.29% (from 2.61% in FY11).  The RM30.6m allowances were 40% lower QoQ.  Financing loss coverage meanwhile hit a high at 117.8%. 

Cost-to-income ratio was also higher at 56.1% vs. 51.2% in 4Q11 and 57.0% in 1Q11.

In summary, the achieved 14.2% ROE was in line with our estimate.

Outlook  As we argued in our initiation note, BIMB will deliver a faster balance sheet growth and achieve asset quality, which is similar to its peers, in 2-3 years time, benefiting from BNM's new ruling under its Responsible Finance Policy. A progressive reduction in credit costs may boost its profitability. Going forward, we maintain our conservative financing growth expectation of 10% and profit rate of 2.96%. Non-fund based incomes contribution is expected to account for 35% for the total income.

We are maintaining our FY12-13E PAT of RM248.8m-267.5m.

Rating  MAINTAIN OUTPERFORM

Trading at 9.35x forward PER and 0.96x FY13E P/BV, BIMB is currently trading at around a 47% discount to the average P/BV of the industry but yet delivering reasonable ROE and earnings growth for 2011-13E.

Valuation   We are keeping our target price of RM2.90 unchanged based on 1.2x FY13 BV of RM2.49.

Risks  Tighter lending rules and a margin squeeze.

Source: Kenanga