BIMB: Mixed Results Amidst Margin and Cost Pressures; Analyst Reiterates Buy with RM0.25 Target Price

The company reported a first-half 2025 net profit of MYR253 million, a 6% year-on-year (YoY) decline, falling short of both TA Securities’ and consensus full-year estimates, reaching only 47% and 45% respectively. The second quarter of 2025 saw net profit at MYR127 million, an 8% YoY drop, although it remained flat quarter-on-quarter (QoQ).

Performance Overview

The lower-than-expected performance was primarily attributed to an estimated 20 basis points (bps) YoY contraction in Net Interest Margin (NIM) and softer-than-anticipated financing growth. While total income saw an 8% YoY increase in the first half, this was largely driven by a sharp 67% YoY rise in non-financing income, which compensated for the NIM pressure. However, the Cost-to-Income Ratio (CIR) experienced a slight uptick to 64%, and credit costs were higher at 35bps in 1H25 compared to 24bps in 1H24. The Return on Average Equity (ROAE) for 1H25 stood at 6.5%, down from 7.2% in 1H24.

Operational Headwinds and Tailwinds

Operating expenses rose sharply by 17% YoY (16% QoQ) in 2Q25, primarily due to higher personnel costs. This increase is thought to reflect a frontloading of bonus accruals, anticipating a more challenging second half for financing income growth following July’s policy rate cut. Despite these headwinds, core fee income demonstrated robust growth, surging 35% YoY, likely supported by strong bancatakaful commissions.

Balance Sheet Strength and Asset Quality

Gross financing grew 6% YoY in 1H25 to MYR72.5 billion, representing a 5% annualised year-to-date growth, which trails the management’s target of 7-8%. The Gross Impaired Financing (GIF) ratio eased slightly to 1.05% from 1.08% in March 2025. Total deposits saw softer 3% YoY growth, but this was offset by a strong 12% YoY increase in investment accounts, which bolstered the company’s capital position. The Common Equity Tier-1 (CET-1) ratio strengthened to 13.9% from 13.0% in March 2025. Management has indicated no material deterioration in asset quality and suggested a potential reversal of pre-emptive provisions in 2H25 if market conditions improve. Financing loss coverage remained robust at 104% in June 2025.

Outlook and Recommendation

The second half of 2025 is expected to present further challenges for income growth, particularly given the impact of July’s policy rate cut. This raises the risk of potential earnings downgrades. However, considering the robust non-financing income, healthy capital position, and the potential for provision reversals, TA Securities maintains its BUY recommendation for the company. The target price is set at RM0.25, offering a 25% upside from the last traded price of RM0.20, as the investment bank awaits further clarity from the upcoming management briefing.