INVESTMENT HIGHLIGHTS

• PAZTAMI within ours and consensus’ expectations.

• Moderate banking income growth despite NIM compression. Mostly supported by strong net financing asset growth.

• Robust asset growth, supported by deposits growth.

• Asset quality remained healthy.

• We retain our FY17 forecast numbers at this juncture.

• Dividend of 14 sen.

• We maintain our BUY recommendation with an unchanged TP of RM5.00.

Within expectations. The Group earnings for 9MFY17 was within ours and consensus' expectations. It was 76.0% and 78.4% of full year estimates respectively.

Acceleration of growth for Bank Islam. Bank Islam Group recorded PBZT growth of +8.9%yoy to RM590.1m. This was due to strong growth in consumer gross financing at +11.1%yoy to RM31.1. Meanwhile, Takaful Malaysia PBZT grew more robustly at +9.7%yoy to RM197.6m on higher net Wakalah fee income arising from the robust business growth in the General Takaful business.

Moderate banking income growth. Banking income for 9MFY17 grew at a moderate pace of +4.6%yoy to RM2.22b. This was despite NIM compression of -18bps yoy to 2.59%. Solid net financing growth of +8.0%yoy to RM40.1b was the main driver for the revenue uplift.

Consumer and Commercial contributor to financing growth.

Consumer and Commercial business units saw gross financing growth of +11.1%yoy to RM31.1b and +13.2%yoy to RM5.79b respectively. This had moderated the fall of -20.4%yoy to RM3.59b in the Corporate segment. Consumer financing was driven mainly by house financing where it grew +10.6% year-to-date to RM16.2b.

Asset growth supported by deposits growth. Total deposits rose +1.1%yoy to RM41.6b. CASA also went up +2.0%yoy to RM13.8b. CASA and transactional investment account ratio as at 3QFY17 was 34.2% vs. 31.5% as at 4QFY16.

Asset quality remained healthy. The Group’s asset quality remained steady as its gross impaired loans ratio stood at 1.07%.

Impact on earnings. We maintain our FY17 estimates as the result was within expectations.

Recommendation. We are maintaining our TP at RM5.00 based on pegging our FY18 BVPS to 1.7x PBV. We continue to like the Group for its healthy asset quality and the robustness of its operations. Moving ahead with digital will also ensure sustainability. We maintain our BUY call.

Source: MIDF Research - 4 Dec 2017