RHB maintains 'Buy' on BIMB, TP at RM5

  • Analyst Reports
  • Friday, 08 Nov 2019

KUALA LUMPUR: BIMB HOLDINGS BHD is confident that it will meet its FY19 targets, underpinned by robust financing growth and strong contribution from Syarikat Takaful Malaysia Keluarga Bhd (STMB).

According to RHB research, BIMB has kept its financing growth target for FY19 unchanged at 6% to 7%.

It said the bank achieved 7.2% year-on-year (y-o-y) growth in gross financing in 1H19 despite lending momentum being impacted by festivities, as household financing grew about 7% y-o-y.

"We expect financing growth to rebound in 2H19, again riding on the strength in household financing," said RHB.

BIMB's net financing margin (NFM) is expected to compress 6-8bps in FY19 due to the 25bps cut in the overnight policy rate in May.

Given the average deposite tenure of five to seven months, RHB expects NFM to see a recovery in 1Q20, short of a further OPR cut.

BIMB is targeting a full-year NFM of over 2.5%, as compared to 2.56% in 2Q19.

RHB said the bank, which owns about 60% equity interest in STMB, stands to benefit from the latter's stellar performance.

In 3Q19, STMB beat market estimates with a 34% y-o-y increase in net earnings. The takaful provider accounts for 34% of BIMB's total operating income

Meanwhile, BIMB's management does not foresee any systemic risks arising from its lending portfolio and expects full-year credit cost to remain at about 20bps.

"The bank has been proactively resolving debts that are undergoing the reschedule and restructuring (R&R) programme, and expects recoveries in 4Q19.

"We pencil in a higher credit cost assumption of 26bps to be conservative," it said.

BIMB's restructuring plan is ongoing with a plan presented to major shareholders and the regulators, and is pending approvals. The bank targets to complete the restructuring by 3Q20.

RHB has kept its buy rating on BIMB with a target price of RM5 based on 1.5x FY20F P/BV.

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