• Keep NEUTRAL and MYR2.45 TP, 3% downside. BIMB’s 1Q24 results disappointed on the back of softer non-financing income, while financing growth was also off to a sluggish start, presumably due to repayments and potential asset quality concerns. While its shariah-compliant status and 7% yield may appeal to certain investors, we prefer banks with better ROE generation among those trading at similar levels.

• Results review. 1Q24 net earnings of MYR129.2m (+9% YoY, -13% QoQ) missed both our and consensus full-year estimates. The main deviation against our numbers came from non-financing income (-16% YoY, -20% QoQ) as a result of weaker trading gains during the quarter. Elsewhere, net financing income was decent, growing 6% YoY (flat QoQ) on the back of an estimated 12bps margin expansion (QoQ: -3bps), while financing growth was still muted at 2% YoY (flat QoQ). Opex growth was a moderate 4% YoY (QoQ: -5%), while credit costs came in lower at 25bps (1Q23: 38bps, 4Q23: 12bps). All in, ROE of 7.0% fell short of management’s >8% target for the year.

• Financing growth acceleration has yet to materialise. We note that financing growth among households was a decent 4% YoY (QoQ: +1%), with drivers likely being residential mortgages, which posted strong numbers at the banking system level. On the other hand, financing growth among non- households was negative, which could be a result of lumpy corporate repayments from the construction and finance sectors. Financing growth will need to re-accelerate down the road in order to achieve management’s goal of 7-8% by year’s end.

• Slight uptick in impairments. The group’s gross impaired financing (GIF) increased 3% QoQ (YoY: -29%), notably due to upticks from the construction and finance sectors. We think a deterioration in asset quality could also explain the slowdown in financing growth for these two segments. On the other hand, household GIF continued to decline, shedding a further 5% QoQ (YoY: -12%) in 1Q24. Overall, the group’s GIF ratio of 0.95% remains below the 1.1% ceiling target for the year despite the 3bps QoQ increase. Financing loss coverage remains robust at 125% (4Q23: 129%, 1Q23: 118%).

• Other highlights. Liquidity within the bank looks ample, with a financing-to- total funding ratio of 86% in 1Q24 (flat QoQ). The group’s current accounts, savings accounts and transactional investment accounts or CASATIA ratio also held steady QoQ at 40%. BIMB’s capital position also looks decent, with a healthy 13.9% CET-1 ratio (4Q23: 14.1%, 1Q23: 15.1%).

• Forecasts and TP unchanged as we await the 1Q24 results briefing later today. Our TP includes an unchanged 2% ESG discount.

Source: RHB Research - 23 May 2024