12M17 results are in line with our/consensus expectations, accounting for 103%/101% of forecast. Our TP is raised to RM5.20 as financing growth is expected to return double- digit growth in 2018. OUTPERFORM maintained.

In line. BIMB 12M17 CNP of RM620m is in line with our/consensus expectation accounting for 103%/101% of estimates. No dividend declared as expected.

Lower loans as expected but an unexpected credit recovery. 12M17 CNP of RM620m improved by 11% on the back of moderate top-line (+4%) boosted by unexpected writeback. Both Income from Takaful Business and Income from Investment of Depositors & Shareholders’ fund moderated at +5% and 4%, respectively. Financing growth of 7% was within guidance/expectations (vs. system +4% growth), but NFM eased faster than expected (14bps vs. 6bps). CIR of 58% was higher than expected at 56% (vs. industry’s CIR of 48%) as opex increased in a faster pace (+7%). Asset quality improved with GIL falling by 5bps to 0.9% with the unexpected credit recovery of 4bps. QoQ, CNP contracted 18% due to higher opex despite (i) a rebound in top-line, (ii) credit recovery of 4bps, and (iii) lower tax rate of 20%. Financing rebound to +5% but NFM stays marginally flat at 2.3%. Asset quality continued to improve, falling by 14bps to 0.9%.

2018 outlook. Recall in our earlier report that BIMB will be targeting a double-digit (or a conservative~10%) financing growth but selective on secured and less risky assets. The lower financing growth in 2017 from the initial target of 8% was attributed to sluggish corporate loans. Confident of its asset quality and good track record in assets, BIMB is expected to raise its personal financing (PF) contribution from 30% to 50% with mortgage financing reduced to 50% from 70% as PF have better financing rate; thus, defending its NFM. NFM will be further supported with the focus on more trade financing (in line with its VBI) as it has greater stability despite lower margins. With BIMB’s Net Stability Funding Ratio (NSFR) regulatory ratio at <100%, we expect funding costs pressure ahead in 2018, eroding its NFM but the recent OPR hike is expected to alleviate NFM concerns with management expecting NFM improvement of 4-5bps in 2018.

Forecast. Our FY18E NP is raised by 18% to RM817m on account of: (i) higher loans (~11% from 10% previously), (ii) 5bps NFM expansion (unchanged), (iii) credit costs at 26bps (from 28bps), (iv) CIR of 58% (from 56%), and (v) tax rate of 25% (from 28%). We introduce our FY19E earnings where we expect earnings momentum to continue with improved loans.

TP revised with an OUTPERFROM call. Our TP is raised to RM5.20 (from RM4.90) based on a blended FY18E PB/PE of 1.6/11.8x (previously 1.6x/12.3x). The PB/PE is a 5-year mean with a -0.5SD to reflect the risks of its higher composition of PF. With a strong double- digit ROE second only to PBBANK we reiterate our OUTPERFORM call.

Downside risks to our call are: (i) lower-than-expected margin squeeze, (ii) lower-than-expected loans and deposits growth, and (iii) worse-than- expected deterioration in asset quality.

Source: Kenanga Research - 01 Mar 2018