• Maintain NEUTRAL and MYR2.25 TP, 8% downside with c.7% FY24F yield. BIMB is scheduled to report its 4Q23 results on 27 Feb. Our MYR172m 4Q net profit forecast implies strong QoQ and YoY growth – the former due to an acceleration in financing growth, and the latter on a normalisation in the effective tax rate. While BIMB may appeal to yield seekers, we prefer banks with greater business banking exposure in 2024. Our unchanged TP includes a 0% ESG premium or discount applied, as per in-house ESG methodology.

• To benefit from strong household loan growth. To recap, BIMB’s YTD financing growth of 2% (annualised) is lagging behind its 4-5% YoY target for the full-year. Banking system statistics for Dec 2023 showed 2% QoQ (8% annualised) loans growth among households. We think that the strong system numbers could provide BIMB with the catch-up required to meet or even exceed its target. Elsewhere, management is confident of a 3bps QoQ NPM expansion (3Q23: 2.17%, 4Q22: 2.22%) as it continues to maintain pricing discipline on deposits amid the seasonal year-end competition period. Should this transpire, net profit income should show positive growth QoQ, but decline YoY on NPM compression.

• Trading gains to drive non-financing income (non-FI). QoQ bond yield movements point towards a favourable trading quarter for banks, and BIMB could use the opportunity to cash out on in-the-money papers. However, we do not expect fee income to outperform meaningfully QoQ and YoY, due to a lack of clarity on fee income levers. On a full year basis, strong year-long trading gains should lift non-FI higher.

• No major surprises on costs. Management’s guidance of 9-10% opex growth in FY23 implies a year-high c.MYR387-400m charge in 4Q, in line with the bank’s historical opex trend. Credit costs are also expected to remain steady, especially with stable household GILs in the wider banking system. We expect BIMB to comfortably meet its <1.5% GIL and 30-40bps credit cost targets (9M23: 1.0% and 33bps).

• Dividends. We expect a final DPS of 3.8 sen (consensus: 1.3 sen), bringing the full-year total to 16.4 sen (consensus: 13.9 sen). Our full-year DPS implies a 60% payout ratio on RHB’s FY23F earnings (consensus: 60% payout on consensus earnings).

• What are we watching out for? We hope to see further clarity on non-FI strategies – particularly fee income – in order to attain 9-10% ROE within the next three years. FY24 outlook commentaries, as well as general financing growth and asset quality updates, would also be helpful.

Source: RHB Research - 20 Feb 2024