1QFY22 net profit of RM105.9m (-33%) is broadly in line with our expectation but disappointed a more bullish street estimate. Although current earnings report shows a shortfall, we believe the group will be able to make up for it in subsequent quarters. However, lacking strong ROEs and dividend returns as compared to its peers, we believe BIMB is fairly priced at current levels. Maintain MP and GGM-derived TP of RM2.85.

1QFY22 broadly within our expectation. We deem 1QFY22 earnings of RM105.9m to be broadly within our expectations but missed consensus’ projections, as it made up 20% and 18% of respective full-year estimates. We believe the negative deviation on consensus end was due to more bullish revenue assumptions. No dividend was declared, as expected.

YoY, 1QFY22 total Islamic income saw a flattish increase (+2%) despite a 7% increase in gross financing as NIMs saw a 10bps erosion. This could be due to cost of funds starting to pick up with CASA mix also coming off slightly (35.4%, - 1.4ppt). On the flipside, investment income fell by 16%, likely due to a more tepid trading landscape amidst global uncertainties. Credit cost spiked to 29bps (+20bps) which we believe is likely to buffer against potential delinquencies from the expiry of repayment assistance programs. No thanks to this, 1QFY22 PATAMI reported 33% lower than the preceding year at RM105.9m.

QoQ, 1QFY22 total income was sequentially weaker by 9% owing to weakness in both financing and non-financing income streams. Loans growth appears to be plateauing (+1%) while CASA proportions remained relatively stable against compression in NIMs. However, thanks to significantly lesser credit cost (- 48bps), 1QFY22 net earnings registered a 33% improvement.

Some picking up to do. Although the group only reflected a slow quarterly loans growth, we believe there are opportunities to make up for it with subsequent quarters to come, tapping into economic reopening. Management’s long-run LEAP25 target aims to increase its asset size to RM100b with digital channels being one of the main catalysts to achieve such target. This is expected to be a healthy mix of growth within the wholesale banking and SME space as well as retail books. Earlier, the group had penned one anticipated rate hike to make up its 2.40% NIMs target for FY22. This will likely be revised upwards given the earlier-than-expected OPR adjustment in May 2022. The group also aim to reduce its CIR to <50% by 2025, hence we believe capital investments are likely to be seen during the current periods.

Post results, we leave our FY22E/FY23E earnings unchanged.

Maintain MARKET PERFORM and TP of RM2.85. Our TP is based on an unchanged GGM-derived FY23E PBV of 0.99x (1.5SD below mean). We believe the stock is fairly priced for now, given that investors may be more inclined to track other financial institutions with greater capital prospects more closely. The stock remains as the sole Shariah bank and will be a staple to those requiring to position for it. The group will be hosting an analysts’ briefing later today.

Source: Kenanga Research - 1 Jun 2022