Wednesday, October 20

BIMB’s insurance earnings likely to be strong — Analysts

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KUCHING: BIMB Holdings Bhd’s (BIMB) earnings from its insurance subsidiary, Syarikat Takaful Malaysia Bhd (Syarikat Takaful), is likely to be strong due to its strategic tie-ups with banks for bancatakaful.

However, analysts have noted that its loans growth has been soft with a slow momentum for personal financing while mortgage loan growth has been decent.

In a report, the research arm of AmInvestment Bank Bhd (AmInvestment) noted that BIMB has maintained a loan growth target for 2018 of eight to 10 per cent and this was supported by a projection for a non-repeat of corporate loans repayments which have resulted in the group’s loans to expand by only 7.1 per cent in 2017.

Excluding the three business repayments totalling RM1.5 billion in 2017, the research team noted that loan growth in the last financial year was circa 10 per cent.

“The group aims to change the mix of absolute amount for expansion of consumer loans in 2018 to a 50 per cent increase in personal financing and 50 per cent growth in mortgage loans (2017: 30 per cent personal financing and 70 per cent mortgage loans).

“This is to improve its asset yield. Also, it is seeking a RM200 million growth in SME loans in 2018,with the establishment of 10 SME centres nationwide,” it said, noting that BIMB has set up the first SME centre in Shah Alam.

However, it pointed out that for the first two months of 2018, loan growth has been soft with a slow momentum for personal financing while mortgage loan growth has been decent.

“Should personal financing growth remain slow, the group will look into increasing the duration of its Treasury securities to raise its asset yield,” AmInvestment said.

In the first quarter of the financial year 2018 (1QFY18), it pointed out that BIMB’s net interest margin (NIM) is expected to trend higher benefitting from the overnight policy rate (OPR) hike of 25bp in January 2018.

“The majority of the tenure of the group’s deposits is less than six months,” the research team noted.

“The group’s funding cost is likely to rise in 2HFY18 leading to an increase up to 10bps for 2018. This is due to the need to raise its longer term funding to move its net stable funding ratio (NSFR) closer to the regulatory requirement of 100 per cent and also due to higher deposit rates with an increase in intensity of deposit competition coupled with the reprising of deposit rates after the increase in OPR,” it said.

Of note, the implementation for NSFR has been delayed to no earlier than January 1, 2019.

“All these will offset the positive impact to its NIM from the OPR increase resulting in a flat NIM in FY18,” AmInvestment opined.

Nevertheless, it highlighted that 1QFY18 earnings from its insurance subsidiary, Syarikat Takaful, is likely to be strong due to its strategic tie-ups with banks for bancatakaful.

It also pointed out that the impact of MFRS 9 would likely to be better than the 30bps drop to its capital ratio guided earlier.

“This is due to the potential improvement to the group’s risk weighted assets,” it added.

All in, AmInvestment maintained its ‘buy’ call on BIMB.