KUALA LUMPUR: BIMB Holdings management is guiding for FY15 loan growth of 10% to 15% and deposit growth of about 5%, says CIMB Equities Research.
It said on Friday the bank has been taking steps to de-risk its loan book. However, despite its sizzling loan growth, BIMB remains a Hold given the concerns on its margin contraction.
“BIMB CEO Datuk Sri Zukri Samat hosted a briefing for about 10 fund managers and analysts. Key highlights were the group’s strategic thrusts and guidance for 2015, including: (1) financing growth of 14-15%, (2) deposit growth of 5%, (3) PBT growth similar to 2014 (-0.5%), and (4) gross impaired financing ratio of less than 1.5%.
“The above reflect management’s cautious stance on earnings outlook,” said the research house.
However, CIMB Research was relatively more positive than management with its FY15 projections of (1) loan growth of 16.8%, (2) deposit expansion of 10.8%, (3) PBT growth of 3.4%, and (4) gross impaired financing ratio of 1%.
“With the above forecasts, we are projecting EPS growth of only 1.6% in FY15, partly due to the dilution from the rights issue completed as at end-2013,” it said.
CIMB Research said as a preemptive measure against any rise in delinquencies, BIMB has been de-risking its loan book in the past two to three years.
For instance, the proportion of unsecured loans (over total loans) was reduced from 57% in December 13 to 50% in June 2015.
It also tightened the criteria for the approval of personal financing, for example lowering the maximum debt servicing ratio from 60% to 50% for borrowers with monthly income of below RM3,000.
“Under the Islamic Financial Services Act 2013, Islamic banks are required to offer investment-account (IA) products to depositors. Management stated that the bank will benefit from this, due to the savings in regulatory and PIDM (Perbadanan Insurans Deposit) costs.
“But this would be offset by higher cost of funds as some of the industry’s deposits would flow to IAs, leading to tighter liquidity for banks,” it pointed out.
CIMB Research said its DDM-based target price (COE of 13.5%; LT growth of 4%) is intact. BIMB remains a Hold as its sizzling loan growth would be offset by margin contractions.
“The group commands one of the best ROEs of 17%-18% in the sector but we are projecting EPS growth of only 2%-8% in FY15-16. We prefer RHB Capital,” said the research house.
