Post-restructuring BIMB’s 9MFY21 net earnings of RM454.7m (+17%) is within our expectation. We anticipate some softness during the 4Q period as applications for assistance programs could lead to further provisions, similar to its peers. We maintain our OUTPERFORM call on the stock for its sole Shariah bank status and fair dividend-to-ROE proposition. However, we reduce our TP to RM3.20 (from RM3.55) as we make model adjustments to reflect a post-restructuring landscape.

9MFY21 within expectations. Presenting its first post-restructuring results, 9MFY21 net profit of RM454.7m is within our expectation, making up 78% of our full-year estimates. Currently, there are no post-restructuring consensus earnings available for comparison. No dividend was declared, as expected.

YoY, 9MFY21 total income was flattish (+1%) with net Islamic income gaining 3% from a higher financing base amidst some normalisation in NIMs (2.89%, -5bps). Meanwhile, investment income narrowed by 3% likely due to the softer trading environment. Operating expenses increased by 5% as higher overall overheads and personnel cost were needed to cater to the reopening of the economy. On the flipside, credit cost eased to our calculated annualised rate of 14bps (-25bps) as lofty pre-emptive bookings were made during the prior year. All in, this led to 9MFY21 net earnings to report in at RM454.7m (+17%).

(QoQ comparison is not available due to the absence of 2QFY21’s post-restructuring numbers)

Well contained earnings delivery expected. While there is no engagement with management this time around, we opine that the group is likely to keep its targets for the time being. The previous credit cost guidance of 30-35bps may be a stretch to achieve lest management decides to frontload more provisioning in anticipation of worsening Covid- 19 ramifications. The group also had a financing growth target of 7%, which though may seem to need much catching up, we believe that the loans take-up in 4QFY21 may be stronger for more retail spending. In the slightly longer term, the group is likely to draw the full brunt on the one-off Prosperity Tax in FY22 which would cause a sequential earnings decline at our current projections. Still, with a generous dividend payout of c.60%, its yield offerings may still be attractive to safety seeking investors, especially in the Shariah space.

Post results, we tweak our FY21E/FY22E earnings from model updates.

Maintain OUTPERFORM but with a lower TP of RM3.20 (from RM3.55). With the availability of the post-restructuring accounts, we fine tune our books and recalibrate our applied valuation on a constant 5-year mean level. Our TP is premised on a GGM-derived 1.18x FY22E PBV. The stock is expected to stand at high ROE levels relative to its dividend payments. Being the sole Shariah-compliant bank also awards the bank a scarcity premium amongst its peers.

Risks to our call include: (i) higher-than-expected margin squeeze, (ii) lower-than-expected loans growth, (iii) worse-than-expected deterioration in asset quality, (iv) further slowdown in capital market activities, (v) adverse currency fluctuations, (vi) delay in restructuring exercise, and (vii) changes in OPR.

Source: Kenanga Research - 30 Nov 2021