KUALA LUMPUR: Kenanga Research is optimistic about BIMB Holdings Bhd's trajectory in the near haul.
The firm said although there was a slight delay in Islamic banking group's restructuring plans from the end of September to early October 2021, other guidance remained firm with some cautionary notes on financing growth in lieu of economic weakness.
This was conveyed by the BIMB management during a recent meeting for the bank's first half of the financial year 2021 (1H21) results briefing.
"Recall that the group has already obtained all necessary approvals from shareholders and regulators for the exercise, only pending legal procedures with the local courts," Kenanga Research said.
Under Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (Pemulih), BIMB is said to have reached a targeted repayment assistance (TRA) proportion of 42 per cent of its total financing, from less than 10 per cent in the second quarter (Q2) financial year 2021.
However, Kenanga Research said this was still below the management's anticipated 50 per cent mix, partly due to the moratorium being opt-in in nature.
"Arising from this, management is also confident that modification losses for Q3 financial year 2021 will range from RM50 million to RM60 million.
"However, the management does accept that part of the underlying issue is economic uncertainty which has led some accounts to seek deferment for liquidity," it said.
Meanwhile, Kenanga Research said competition in financing and deposit markets could ramp up, as the market would have come to normalise and fully adjust product pricing from a stagnant overnight policy rate (OPR) since Jul 2020.
That said, BIMB believes normalisation will come but it should not affect it significantly at least until the financial year 2022 (FY22).
"As of now, the management believes they are able to sustain their net interest margin target of 2.20-2.40 per cent.
"In part, alongside the challenging economic climate, the group's optimism towards being able to achieve its previous financing growth target of 8.0-9.0 per cent is now closer to 7.0 per cent.
"This will likely be further aggravated should the economy remain suppressed for a prolonged period," the firm said.
Post-meeting, Kenanga Research has left its earnings assumptions unchanged, as it believes assumptions are still mostly in line or more conservative than management's guidance.
"We maintained 'outperform' on BIMB with a target price of RM5.10," it said.