INVESTMENT HIGHLIGHTS

• Within our expectation but beat consensus'

• Growth continue to be supported by Bank Islam and Syarikat Takaful

• Gross financing growth continue to be strong

• Matching deposits expansion with loans growth

• No change to earnings forecast.

• We maintain our BUY with unchanged TP of RM4.85

Within our expectation. For FY18, the Group net profit came in line with our expectations at 101.6% of our full year estimate. Meanwhile, its PAZTAMI beat consensus’ expectations at 106% of full year estimate. Total net income expanded at faster rate compared to operating expenses with increase of +8.5%yoy vs. 4.8%yoy respectively.

Strong contribution from Bank Islam and Takaful Malaysia. Bank Islam Group's FY18 PBZT grew +5.6%yoy to RM810.3m due to +19.5%yoy expansion in operating profit to RM946.3m. For Takaful Malaysia Group, its PBZT rose +32.7%yoy to RM340.3m.

Slight compression in NIM. For Bank Islam Group, the net income margin (NIM) compressed slightly by -4bps qoq to 2.61% in 4QFY18. This could be due to deposits competition faced by the industry towards the year-end. We note that average liabilities rate went up +4bps qoq to 2.72%. However, it was still +1bps yoy better.

Gross financing growth beat banking system growth. Gross financing grew +8.9%yoy to RM45.7b. This follows from robust growth in all segments, namely consumer, commercial and corporate. These expanded +9.6%yoy to RM35.1b, +9.8%yoy to RM6.7b and +4.3%yoy to RM4.6b respectively. As for the consumer financing segment, we note that the growth for house and personal financing remains strong. House financing book grew +11.4%yoy to RM18.7b while personal financing book rose +11.2%yoy to RM13.8b.

Matching growth in deposits. Total deposits grew +8.0%yoy to RM49.9b. CASA declined -2.6%yoy to RM15.1b but this was moderated by transactional investment accounts which rose +30.1%yoy to RM2.6b. In total, these two CASA-like accounts grew +1.1%yoy to RM13.8b.

Asset quality remains solid. GIF ratio trended lower to 0.92% as at 4QFY18 from 0.97% as at 3QFY18.

Impact on earnings. We make no change to our earnings forecast as the result was within expectations.

Source: MIDF Research - 1 Mar 2019