Keep NEUTRAL, new MYR2 TP from MYR2.30, 7% upside with c.6% FY23F yield. BIMB’s 1Q23 net earnings missed estimates, from strong NIM compression and weaker-than-expected financing growth. Gross impaired financing (GIF) continued expanding, but management remains confident on asset quality. After a c.29% share price decline YTD, concerns over the bank’s deteriorating asset quality are starting to be priced in, although a lack of near-term re-rating catalysts could keep it range-bound.
1Q23 – a slow start to the year. BIMB’s 1Q23 net earnings of MYR118.1m missed our and consensus estimates. The variance against our forecasts largely arose from its weaker-than-expected net fund-based income (+5% YoY, -9% QoQ) – due to a 21bps/16bps YoY/QoQ NIM compression – albeit this was mitigated by better-than-expected trading gains. Overhead costs surged 21% YoY (QoQ: -4%), leading to a higher CIR of 61.5% (1Q22: 58.9%, 4Q22: 62.3%). Credit costs of 38bps fell within its guidance of 30- 40bps. 1Q23 ROE stood at 6.8%, from 6.5% in 1Q22 and 7.4% in 4Q22.
Financing growth target kept. Gross financing grew 11% YoY but was flat YTD – vs its unaltered target of 7-8% for FY23. To achieve the target, key growth areas would be mortgages and personal financing in the consumer book, while business banking segments will have a focus on green energy, healthcare, and government-backed infrastructure projects. Liquidity remains ample, based on a financing-deposit ratio of 84% (1Q22: 86%) – deposits grew by 14% YoY (QoQ: +3%), with the current, savings and transactional investment accounts (CASATIA) ratio remaining firm at 42.5% (1Q22: 38.6%, 4Q22: 36.8%). Management expects NIM to gradually rebound to 2.10% in 2Q23, then to 2.20% in 4Q23.
Impaired financing near the peak. GIF surged 49% YoY (QoQ: +9%) – mainly dragged by its retail GIFs, which almost doubled YoY (QoQ: +19%) in tandem with the expiry of repayment assistance programmes. The GIF ratio stood at 1.37% in 1Q23 vs 1.02% in 1Q22 (4Q22: 1.27%). Management believes the GIF should not surpass 1.5% in FY23, and is comfortable with its financing loss coverage of 135% and overlay balance of MYR123.6m (c.12% of total provisions).
Our FY23-25 net profit projections drop by 6-8% as we factor in lower NIM assumptions, although this is mitigated by higher non-fund-based income. As a result, our TP decreases to MYR2.00 from MYR2.30, and includes an unchanged 0% ESG premium/discount, as per our in-house proprietary methodology.
ESG framework update. As there is greater focus on the E pillar due to critical climate change issues, we have tweaked our ESG weightage. Henceforth, we assign a weightage of 50% to the E pillar, followed by 25% each to the S and G pillars. Further details are in our 2 May thematic research note titled Envisioning a Better Future.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....