• Stay NEUTRAL, TP drops to MYR2.45 (9% downside) from MYR2.55, c.6% FY25F yield. BIMB’s 9M24 results missed estimates on the back of softer- than-expected non-financing income, while financing growth also disappointed on account of large corporate repayments. The counter is trading below -1SD from its mean P/BV but, as ROEs have yet to recover to the >10% levels of the past, we think its valuation is fair at present.

• Results review. 3Q24 net profit of MYR130.4m (-5% QoQ, -7% YoY) brought the 9M24 total to MYR397m (+1% YoY) – this formed 66% and 68% of our and consensus full-year estimates. For the 9M, net financing income added 4% YoY from a 4bps NIM expansion. Non-financing income, on the other hand, was down 12% on a decline in trading income, although encouragingly, core fees was up 11% YoY. The negative JAWs experienced from an 8% opex increase led to a larger CIR of 63% (9M23: 60%), which resulted in an 8% decline in PIOP. This was mitigated by a lower credit cost of 23bps (9M23: 35bps), leading to a smaller PBT drop of 1%. 9M24 reported ROE stood at 7.0% (9M23: 7.7%), falling short of management’s 8% target for the year.

• Financing growth has been rather muted, up only 2% YoY (QoQ: +1%) against management’s initial target of 7-8%. We understand that this was partly a result of lumpy repayments from institutional clients, who refinanced via the Islamic capital markets. Aside from this, other drivers of financing growth looked healthy – residential mortgages, personal finance, and commercial financing were all up by 4-6% YoY. Management also expressed an interest in the hire purchase financing segment moving forward.

• BIMB’s gross impaired financing (GIF) ratio climbed to 1.02% (2Q24: 0.92%, 3Q23: 0.97%) due to delinquencies from the non-retail portfolio. Management attributes this partly to a shift in its financing mix, as it now has a bigger portion of commercial customers, which tend to carry higher asset quality risk levels vs corporates. BIMB remains comfortable with its asset quality position, as its current GIF ratio is still below the 1.1% ceiling. Financing loss coverage remains ample, at 150% (stable YoY).

• Other highlights. BIMB’s interim DPS for 9M24 should roughly match the 12.59 sen (72% payout ratio) declared in 9M23. This should be followed by another payout in 4Q to bring the total payout ratio for the year to 60-70%. CET-1 ratio stood at a healthy 14.5% (Dec 23: 14.1%). In 3Q24, NIM slid 9bps QoQ on the issuance of costlier sukuk funding that quarter. This formed part of the group’s asset-liability management strategy, and loosened the financing-to-available funds ratio to 83.8% (June: 84.3%, Sep 2023: 88.4%).

• We cut our FY24-26 net profit forecasts by 10%, 11% and 9% on softer financing growth assumptions, but this is mitigated by lower credit costs. Our TP drops to MYR2.45, and includes an unchanged 2% ESG discount.

Source: RHB Securities Research - 2 Dec 2024