Greater optimism on BIMB’s prospects — analysts

KUALA LUMPUR: Analysts came away from a meeting with the management of BIMB Holdings Bhd (BIMB) recently with greater optimism regarding the group’s prospects.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the strategic focus of the group is the 3D, namely Deposit Drive, Defensive Strategy and Digitalisation.

MIDF Research noted BIMB’s management stated that it will focus on current account, savings account (CASA) such as salary accounts, cash management and Mudarabah current account.

“Also, the group will focus on finding the right funding mix such as Cagamas and medium term note (MTN) issuance.

“As for the Defensive Strategy, the group will be cautious with its assets growth,” MIDF Research said.

Together with the Deposit Drive, MIDF Research believed this is the right move at the current juncture. The research arm opined that this will stabilize margins and ease any compression.

“Also, we note that management is implementing this to preserve asset quality,” the research arm said. We like the fact that management are being prudent despite its solid asset quality amongst the industry.”

MIDF Research highlighted that BIMB is collaborating with Cognizant, a FinTech company to build the group’s digital capability.

The research arm believed that this is essential due to prevalence of digitalisation in current environment.

“We like the fact that the group has set up a dedicated digital banking division which are responsible for the digital transformation, which include channels, processes, productivity and analytics amongst others,” it said.

MIDF Research believed that this will give cost saving benefits.

“For example on the potential impact is faster opening of account through electronic ‘Know Your Customer’ process.

“Furthermore, there are no capital expenditure (capex) or operating expenditure (opex) involved which is to be borne by its FinTech partner.”

MIDF Research noted that the management also stated BIMB will be increasing the group’s presence in the small and medium enterprise (SME) segment.

The research arm liked the fact that this will be address net interest margin (NIM) compression and ties in well with BIMB’s Deposit Drive strategy.

“The group will also target schemes that are made available by the Government such as guarantee schemes which will be a form of risk mitigation.

“We are pleased to learn that the group will be selective in its sector exposure,” MIDF Research said.

While it might seem that BIMB is late when compared with the group’s peers, the research arm believed that the strategy to target SMEs amongst its corporate borrowers’ supply chain will ensure that it has a captive market.

In MIDF Research’s opinion, BIMB would derive tangible benefit should it decide to change its group structure, whereby its listing status is taken over by its banking subsidiary.

“Amongst the benefits are the reduction in cost and better capital adequacy,” the research arm said.

MIDF Research also believed that shareholders would gain directly from participating in the performance at the bank level.

Syarikat Takaful Malaysia Bhd (STMB) has begun the process of similar reorganisation and the research arm did not rule such possibility at the group level in the near future.

After a review of BIMB’s operations and its financial performance, MIDF Research raised its optimism on the near term prospect of the group.

“We like the group for its healthy asset quality and the robustness of its operations.

“Moving ahead with digital will also ensure sustainability,” the research arm said.