BIMB’s FY18 results are in line. Financing above guidance/estimation with asset quality improving. No change in TP and Call.

In line. BIMB’s 12M18 CNP of RM682m is line, accounting for 100% of both our/consensus estimates. No dividend declared as expected as dividends are usually declared in Q3.

Strong financing. YoY, 12M18 CNP grew +10%, aided by broadbased top-line (+125%), mitigated by impairment allowances (RM82m vs 12M17: RM16m write-backs) and higher opex (+5.0%). Top-line was supported by Income from Takaful Business and Income from Investment of Depositors & Shareholders’ fund, which surged ahead at +22% and +8%. The strong income from investment of depositors was attributed to financing growth of +8.9% (vs. guidance expectation of +8% and system loans of +5.6%) and slight enhancement in NFM (net financing margin) of 1bps to 2.3% despite CASA falling by 3ppt to 30%. Asset quality improved slightly for the period as GIL fell 1bps to 0.92% and credit charge of 0.18% (vs. expectation of 0.26%).

QoQ, 3Q saw a weaker performance as CNP slumped (-19%) to RM161m. While Income from Takaful Business improved by +11% to RM252m, Income from Investment of Depositors & Shareholders’ fund fell 5% to RM495m. Financing growth saw its best quarterly performance for the year (+3%) led by households (+2%). NFM fell 17bps to 2.4% as asset pricing comes under pressure. Asset quality remains solid with GIL falling by 5bps and credit cost slashed by another 7bps to 0.17%

Maintained financing target of 8%. We believe its financing target of +8% YoY still holds moving forward in order to maintain asset quality. Growth will be supported by traction in PF partly due to its strategy of rebalancing its PF to 50% of households financing. The traction in personal financing (PF) saw better NIM aided by optimising treasury yields. With NSFR fully complied, we understand that better NIM enhancement is expected for 2019 assuming financing target of 7-8% is maintained and PF rebalancing is complied, aided by improving low costs transactional Investment Account. We believe the traction into PF and mortgage is valid as asset quality is consistently stable and impairment allowances have been below guidance and expectation.

No revision in earnings. Pending a management briefing this afternoon, we resist from making changes ahead to our FY19E earnings; hence, TP and call maintained.

TP and Call maintained. TP of RM5.05 is based on a blended FY19E PB/PE ratio of 1.5x/11.9x (unchanged) with PB at 1SD-level below the 5-year mean to reflect the risk of uncertainty on the domestic/external front. OUTPERFORM on account of consistently higher loans growth among its peers and a forward ROE of >14% (vis-à-vis PBBANK with a forward ROE of <14%) makes it a more attractive proposition.

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

Source: Kenanga Research - 1 Mar 2019