BIMB’s 2QFY18 likely to see some upticks in impairment of conusmer financing loans
KOTA KINABALU: Despite BIMB Holdings Bhd’s (BIMB) second quarter of financial year 2018 (2QFY18) been projected by analysts to likely see some upticks in impairment of consumer financing loans, credit cost is still on track to meet expectations.
According to AmInvestment Bank Bhd (AmInvestment Bank), the upticks in impairment of consumer financing loans is due to the festive season which has caused the need to reclassify the financings as impaired after 30 days of the payment due date.
“It will lead to an uptick in the group’s overall gross impairedloan (GIL) ratio from 0.99 per cent in 1QFY18, consequently resulting in an increase in collective allowances with a net provision for loan losses in 2QFY18.
“Nevertheless, the provisions in 2QFY18 are expected to be lower than the preceding quarter while its GIL ratio is still expected to be significantly lower than the industry’s 1.6 per cent,” the research firm said.
The research firm expected the arrears for consumer financing to be eventually regularised in 3QFY18, consequently lowering back the group’s GIL ratio.
“On a comforting note, credit cost is still on track to meet our assumption and management’s guidance of 23 basis points (bps) and 20 to 22bps respectively for FY18.”
AmInvestment Bank highlighted that in the quarters ahead, there remains some pressure on the group’s funding cost.
It further highlighted that this is due to the need to raise longer term funding to comply with the impending requirement of a net stable funding ratio of at least 100 per cent.
“Despite this pressure, management still aims to keep its net income margin (NIM) stable at 2.6 per cent for FY18.
“It plans to raise the mix of the group’s expansion in consumer financing to comprise more personal financing, which carries higher yields compared to house financing. This, coupled with active asset and liabilities management by its Treasury to increase its asset yield, are initiatives to counter the funding cost pressure and stabilise its NIM.”
The research firm expected the NIM expansion of three bps quarter on quarter (q-o-q) to 2.63 per cent in 1QFY18 that has benefitted from the January 2018 overnight policy rate (OPR) hike to taper in the subsequent quarters of FY18 contributed by a rise in funding cost.
While management is still guiding for a financing growth of eight to 10 per cent for FY18, AmInvestment Bank imputed into its FY18 estimates, a loan growth expectation of eight per cent.
The research firm noted that the group’s growth of consumer financing now consists of 45 per cent personal financing and the remaining 55 per cent in house financing. The target for FY18 is 50 per cent personal and 50 per cent house financing.
“To expand its small and medium enterprise (SME) base, the group’s is targeting the supply chain financing. It plans to focus on SMEs which have secured contracts from government linked companies (GLCs) such as Petroliam Nasional Bhd (Petronas).
“These comprises self-liquidating working capital financing. Proceeds from these contracts will be channelled directly to the bank to settle the financing.”
AmInvestment Bank also noted that the group’s gross financing grew by 6.7 per cent year on year (y-o-y) in 1QFY18 which was still above the industry rate.
“It was primarily driven by personal financing which had been tied to salary deduction of employees as well as the secured house financing.
“We remain comforted by the group’s negligible exposure to large infrastructure companies that will be impacted by the termination and review of projects.”
On the group’s personal loans, AmInvestment Bank said the management hinted that the will be minimally affected by the termination of 17,000 government staff contracts under the new government.
“We understand that their personal loans were mainly extended to full-time employees and not short-term contract workers.
“Meanwhile, on the review of projects/contracts, the group does not have exposure to large scale contractors.”