• Maintain NEUTRAL, new MYR2.55 TP from MYR2.45, 7% downside with c.6% FY25F yield. BIMB’s 1H24 results broadly met expectations – we think the softer-than-expected trading income could pick up once the global rate cut cycle starts in 2H24. Elsewhere, financing growth remained muted, while the NIM and asset quality outlook appears stable. At this juncture, we have no major concerns on BIMB, but we prefer banks with bigger non-retail exposure to better capitalise on current thematic plays.

• Results review. BIMB’s 2Q24 net profit of MYR137.2m (+1% YoY, +6% QoQ) brought the 1H24 total to MYR266.3m (+5% YoY) – this formed 44% and 45% of our and Street full-year forecasts. The key deviation from our numbers came from softer-than-expected non-financing income (-14% YoY), due to muted treasury and investment income. Net financing income, however, rose 6% YoY from a 9bps NIM expansion, leading to operating income growth of 2%. Opex was up 8% YoY on personnel costs and tech spend, albeit mitigated by lower credit costs of 23bps (1H23: 39bps). All in, 1H24 reported ROE stood at 7.4% (1H23: 7.1%), which missed management’s target of ≥8%.

• Financing growth still sluggish. The group’s gross financing book grew 3% YoY (flat QoQ), lagging management’s target of 7-8% for the year. Management indicated that growth in the household segment has been affected by some seasonal factors, while the non-retail book saw lumpy repayments. Management expects financing growth to accelerate later this year, as it has a strong pipeline of disbursements flagged for 2H24. The group is also actively working on digital initiatives to improve mass-market customer acquisition. It is also looking at transforming its branch network to provide wealth offerings for its higher-net-worth clients.

• Could trading income pick up? Part of the reason for the muted non-FI is because the group has been actively accumulating, instead of taking profit, on treasury assets, which has already grown 15% YTD. We think this could be the bank positioning for a rate cut cycle, which would offer further opportunities for profit-taking. On fees (+9% YoY), bancatakaful was a key driver in 1H24, while the bank’s wealth offerings are also seeing traction.

• Optimistic on asset quality. The gross impaired financing (GIF) ratio declined 3bps QoQ (YoY: -11bps) to 0.92%, mostly thanks to improvements in the retail book. The bank thinks it can maintain credit cost at 23bps for the full year, although we are cognisant of allowances picking up in 2H24 in tandem with the acceleration in financing growth. Nevertheless, its financing loss coverage of 125% (1Q24: 123%, 2Q23: 122%) looks ample.

• We make no changes to our forecasts as we expect trading income to improve in the coming quarters. After rolling forward our valuation year, we upgrade our TP to MYR2.55 from MYR2.45, with a 2% ESG discount built in.

Source: RHB Research - 27 Aug 2024