INVESTMENT HIGHLIGHTS

• BIMB’s 1QFY17 PAZTAMI of RM151.1m (+11.7%yoy) was within ours and consensus’ expectations

• Strong net financing and deposits growth. Asset quality remained healthy

• We retain our FY17 forecast numbers at this juncture

• We maintain our NEUTRAL recommendation with an adjusted TP of RM4.90

Within expectations. BIMB’s 1QFY17 PAZTAMI was in line with ours and consensus’ estimates coming in at 28.1% and 28.3% of respective full year estimates. Its PAZTAMI grew +11.7%yoy to RM151.1m an account of higher net income.

Both business units saw solid growth. Bank Islam Group recorded PBZT growth of 9.7%yoy to RM192.1m due to growth in business activities. Meanwhile, Takaful Malaysia PBZT grew a strong +24.7% to RM72.6m on higher net wakalah fee income.

Strong net financing growth. Net financing continued to expand, increasing +12.8% to reach RM39.8b as at 1QFY17. Correspondingly, fund based income also increased, by +5.8%yoy to RM29.7m. The strong net financing growth came from the solid expansion in the housing segment. Financing for housing expanded +20.2%yoy to RM14.6b, suggesting that its strategy is bearing fruit. PF assets grew +9.4%yoy to RM11.5b.

Deposits growth to support asset growth. Customer deposits and investment accounts stood at RM47.6b, an increase 14.5%yoy. CASA Deposits and Transactional Investment Accounts ratio as at 1QFY17 was 32.6% vs. 36.8% as at 1QFY16.

Asset quality remained healthy. The Group’s asset quality remained steady as its gross impaired loans ratio stood at 0.95% compared to 0.94% as at 1QFY16.

Impact on earnings. We maintain our FY17 estimates as the result was within expectations. The Group is targeting overall loans growth of 8% with focus to secure more HFA (particularly from affordable housing) and PF assets (particularly from professionals, government servants and selective consumers with salary reduction). We believe that this is achievable given the strong showing in 1QFY17.

Recommendation. We are adjusting our TP to RM4.90 as we roll over our valuation to FY18. We are pegging our FY18 PBV to 1.65x, which is 1 standard deviation below its 5-year historical mean PBV of 1.90x. While we maintain our Neutral call, we do not rule out a re-rating should the Group’s performance continues to improve

Source: MIDF Research - 17 May 2017