• Maintain NEUTRAL with new MYR2.30 TP (from MYR2.60), 1% upside and c.5% yield. BIMB’s 4Q22 net profit of MYR126m brought full-year earnings to MYR492m, meeting our/consensus estimates. While financing growth was robust at 11% in FY22, gross impaired financing (GIF) continued its uptrend, rising 47% during the year. With financing loss coverage (FLC) dissipating by the quarter, we keep to our cautious stance on the counter for now.

• In line with expectations. FY22 net earnings of MYR492m (-8% YoY) met our and Street’s estimates. The YoY decrease was attributable to the recognition of Cukai Makmur, as PBT was a decent 6% increase. Net financing income (NFI) grew 13% YoY on the back of a strong 11% growth in gross financing, but this was offset by a weaker non-FI (-35% YoY). A 10% increase in opex led to a CIR uptick of 3ppts to 60%. Credit cost of 25bps was well below guidance of 30bps, though 4Q saw an 8bps rise in the number owing to smaller net reversals of general provisions. Full-year ROE of 7.5% missed management’s 10% target, while a second interim DPS of 3.4 sen brought the full-year amount to 13.8 sen (58% payout).

• Operational highlights. FY22 financing growth exceeded management’s 8% target, largely owing to increased financing to households (+9% YoY). Deposits growth was also encouraging at 6% YoY, though mostly led by term deposits – the group’s CASATIA ratio of 36.8% at end-Dec 2022 was down c.3ppts YoY. Liquidity and capital ratios remained healthy, with a FDR and CET-1 ratio of 86.3% and 13.6% respectively.

• GIFs rising, coverage dissipating. BIMB’s YoY rise in GIFs led to a ratio of 1.27%, vs 0.96% at end-FY21. Management deems this to be within expectations given the progressive expiry of repayment assistance, and indicated no intentions of topping-up provisions. This is an immediate concern of ours, as FLC has been on a downtrend since 3Q21, having halved since then to the 4Q22 level of 124.5%.

• Outlook and guidance. Management expects financing growth momentum to persist in FY23F, and provided us with a 7-8% target in an earlier meeting. Deposits are expected to keep pace with financing growth despite the ongoing deposit competition. CIR is expected to remain elevated at 55- 60% as the bank continues investing in human capital and technology.

• We make no changes to our forecasts pending the analysts’ briefing later today, but our concerns over BIMB’s asset quality lead us to raise our cost of equity assumption by 1ppt to 10.6%. Our TP is lowered to MYR2.30 (from MYR2.60) as a result, and includes a zero ESG premium/discount. We maintain our cautious stance on BIMB for now, given GIFs have likely not yet peaked, while it is still targeting above-industry financing growth.

Source: RHB Research - 28 Feb 2023