INVESTMENT HIGHLIGHTS

• PAZTAMI within ours and consensus’ expectations

• Robust growth from Bank Islam and Takaful Malaysia

• Deposits growth supported asset growth

• Asset quality remained healthy

• No change to earnings forecast

• We maintain our BUY recommendation with an unchanged TP of RM5.03

Within expectations. The Group earnings for FY17 was within ours and consensus' expectations. It was 100% and 101% of respective full year estimates.

Robust growth for Bank Islam and Takaful Malaysia. Bank Islam Group recorded PBZT growth of +6.5%yoy to RM767.1m. This was due to strong growth in financing at +7.5%yoy to RM42.1. Meanwhile, Takaful Malaysia PBZT grew more robustly at +14.8%yoy to RM253.7m on higher net Wakalah fee income arising from the robust business growth in the General Takaful business.

Asset quality resilient. Gross impaired financing ratio improved by - 5bps yoy to 0.93% as at 4QFY17. This came in despite the financing grotwh. Meanwhile, Bank Islam's financing loss coverage ratio stood at 160.0% vs. the industry average of 82.9%.

Deposits growth supported the asset growth. Total deposits rose by RM0.3b to RM46.2b. Investment account went up by RM0.4b to RM4.3b. CASA and transactional investment account ratio as at 4QFY17 was 34.6% vs. 31.5% as at 4QFY16.

Moving forward, the strategic focus of the Group is the 3D, namely (i) Deposit Drive, (ii) Defensive Strategy and (iii) Digitalisation. The Group will be cautious with its assets growth and Deposit Drive. We believe this is the right move at current juncture. We like the fact that management are being prudent despite its solid asset quality amongst the industry.

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

Recommendation. We are maintaining our TP at RM5.03 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 - 1 Mar 2018