bimb holdings analysis

8/12/2019 BIMB Holdings Analysis

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BIMB Holdings (BIMB MK)7 January 2014

See important disclosures at the end of this report 3

Executive Summary Investment highlights:

Financing growth of 24% (andforecast of 17%) superior to theindustrys 9%

Improving ROEs since 2007 LDR of 65 % vs industrys 83% to

sustain superior financing growth

Top 2 position in NIM; ~3.0 %, dueto low cost of funds (COF) at ~2.0%

High CASA of 35 % vs industrys25%

Sticky deposit base and support ofkey corporate depositors

Diversification advantage may helpboost non-financing income (NFI)ratio to 40%, with significantcontributions from takaful subsidiary

STMB and fee income business Improving asset quality. YTD NPL

ratios at 1.39% (2007: 22.4%) andindustrys ~2%

Nevertheless, BIMB has highlyconservative provisioning buffers,as exemplified by its loan losscoverage (LLC) of 159% vsindustrys 99 %

Key risks and areas for improvement: Moderating financing growth rates

amid a tighter credit cycle andregulatory environment

Regulatory risks, could result inpotential changes in the structure ofIslamic contracts for both financingand deposit products.

Challenges to grow secured assetsto 50:50 (proportion of secured vsunsecured financing)

NIMs compression is expected tostabilise. We have factored incompressed yields owing to a highfloating-rate financing base andhigher COF. However, changes incompetitive landscape may prolongthis trend

Heavy dependence onGovernment-linked entities andcorporates for deposit-tapping.

A declining CASA ratio due to highdemand for high-cost deposits. Weunderstand Lembaga Tabung Haji(LTH) is one of the key high-costdepositors

It may incur higher-than-expectedoperating expenses while in agrowth phase.

Opportunities/ventures Acquisition of the remaining 49%

stake in Bank Islam from LTH andDubai Financial Group. This willaddress minority leakages andallow BIMB to attain full control ofBank Islam, its largest business

Earnings accretion is expected tobe significant. The deal is EPS-neutral and ROE-dilutive on a fullwarrants conversion scenario, butaccretive on a long-term ROE. (seeFigure 13 for our computation)

STMB is required to separate itstakaful business within five years

Bank Islam is considering tappinginto the refinancing of conventionalloans into sukuk financing. It seescontinued demand for infrastructurefinancing

Its new ar-rahnu (pawn broking)products, which fetch high margins,make up a very small portion of itsfinancing books currently

Industry statistics Malaysia is committed to becoming

a key Islamic finance hub

Islamic finance has huge potential.It is expected to account for 40% ofthe total financing market by 2020

About 64% of global sukuk marketoriginates from Malaysia(~USD154bn)

The takaful market is more under-penetrated relative to itsconventional insurance counterpart

Valuations/recommendations We initiate coverage with BUY on

BIMB with a FV of MYR4.90,pegged to a 17x FY14F P/E, or atthe top range of its peers. Theimplied P/BV is 2.0x.

We forecast a conservative 3-yearforward CAGR of 18% for financingand 14% for deposits (on risingLDR assumption)

We forecast PPOP CAGR of 12%due to: i) lower NIMs, and ii) CIR toremain elevated

Our FY13-15F EPS CAGR is at10% due to our conservative creditcosts assumption, since BIMB is notimmune to financing defaults

Our FV is derived from SOP and isfully-diluted for the warrants (1.9bnshare base). Our SOP values Bank

Islam s earnings at a 13.5x P/E andSTMB at 14x P/E.

Key strategies Bank Islams Hijrah to Excellence (H2E) plan commencedin 2013 (2013-2015):

Financing growth target of 20%annually

LDR target of 75% by 2015

Profit growth target of 15% perannum

Asset growth target of 15% perannum

Cost-to-income (CIR) target at 50%

Non fund-based income target ratioof 15% by 2015, which mainlycomprises fee income

More secured financing

Float: fixed-rated financing targetratio of 60:40

Regionalisation plans to expandinto Indonesia

150 branches by 2015 (currently131)

Crown Jewel 1 Bank Islam: BIMB has a 51% stake, but may

soon own 100%

Pioneer Islamic bank since 1983

Returned to profitability through 3-year turnaround plan (2006-2009),and continued its transformation viasustainable growth plan (2009-2012)

Total customer base >3.5m

Predominantly a retail bank

A beneficiary of growth in the sukuk capital markets and development ofthe Islamic finance industry

Crown Jewel 2 STMB: BIMB has a 61% stake

Pioneer takaful operator since 1984

Commands Top 2 market positionin the takaful industry, with ~20%market share

Leader in group family takaful products

Continues to penetrate into both theMuslim and non-Muslim customersegments through its uniqueoffering of 15% no-claim rebate(NCR)

Please see our SWOT analysis onpage 47 for further information


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Investment Highlights SummaryROEs set to rise, plugging minority leakages . BIMB acquired the remaining 49%stake in Bank Islam at end-2013 for MYR2.9bn. This was funded by the issuance of2-for-5 rights, warrants and a 10-year sukuk . The deal will allow the group to take fulladvantage of the growth potential of its banking unit. We are positive on the deal,which is expected to improve its longer-term ROE beyond >13%, and is highly

earnings-accretive by 65-78% in the near-term. The stock has re-rated, trading at+2SD historical P/E and P/BV, on positive reaction to corporate developments. BankIslam has set targets to outperform the industry, which we believe are achievable,while STMB, its takaful unit, is poised to maintain high ROEs at ~24% in the comingyears. The former is already a major contributor to BIMBs revenue and profit beforezakat and tax (PBZT) at >80%.

Financing growth still superior (as above). BIMBs 30% y -o-y growth was higherthan the banking industrys 9%. Its financing growth has been outpacing the bankingindustry since 4Q11. Firstly, BIMB leverages on its LDR, which is low at 65% vs theindustrys 83 %. Secondly, we believe its already conservative approval criteria helpslimit the downside risks arising from the recent tightening on household lending. Forthe same reason, we believe BIMB may chip into its peers share of retail lending. Inaddition, the group sees opportunities in infrastructure financing and refinancing ofconventional loans into sukuk financing. Taking into account a more stringentregulatory environment, Bank Islam has set its financing growth at a conservative20%, which is also supported by its current Tier-1 equity ratio of 13%.

NIMs compression at a moderate pace. As at 3Q13, BIMB posted the highest NIM(at 2.9%) vs that of its peers. We expect NIMs compression to moderate, following aperiod of decline in asset yields, its higher proportion of floating-rate financing andincreased COF. Further compression is expected from competitive pressures, but ata normalised pace. We expect BIMBs NIMs to remain consistently above that ofindustry NIMs, as its aim to maintain a high exposure to profitable financingsegments. While this could prove challenging in the current environment, we reiterateour argument that BIMB may outperform its peers in its retail lending portfolio.

Commendable CASA. For the past three years, BIMBs CASA ratios of 37-47%have been consistently above the industry average of 25%. We understand that theCASA deposit base comprises Government bodies/agencies and religiousassociations through LTH. These customers should help sustain a recurring 30%CASA ratio vs managements target of 35% . To mitigate a CASA downtrend, thegroup plans to secure more CASA from its large customer base, particularly from theyoung professionals segment. CASA management is a key target for BIMB toalleviate recent concerns over the increasing COF.

Enhancing non-financing income. BIMBs N FI contributed 40% of its 3Q13 totalincome. The bulk of its ancillary income comes from strong recurring contributionsfrom STMB, its takaful subsidiary. We expect the latter to grow at 12% earningsCAGR through FY13F-15F. Excluding STMB, its NFI ratio stands at 13%, slightlybelow its target non fund-based income ratio of 15%. Management attributes theopportunities to boost its NFI to the growth in its merchant-based business, tradingand a strong pipeline in the capital markets.

Improving asset quality. Gross NPL declined to 1.36% in 2Q13 from the 22.0%high seen in FY05-06, aided by an efficient cleanup of its balance sheet andsubstantial writebacks. In addition, its above-industry provisioning buffers are in linewith its prudent underwriting standards. We opine that BIMBs current gross NPL is atcomfortable levels, given its large retail portfolio. The group guided that the financingrecovery/writebacks will not be substantial moving forward, which suggests thatfurther improvements in its gross NPL will not be significant. Also, credit costs maynormalise to 30-40bps (FY12: 33bps), as management guided that collectiveassessment, or provisioning, may increase to cover higher-risk accounts from the lowbase. Our credit costs assumption is at the conservative end of the 35-40bps range.


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Group ProfileFigure 1: Group structure (as at Dec 2012)

51.3% 6.7% 5.1% 8.5% 28.5%

19% 51% 100% 61% 48% 100%

30%

OthersTabung Haji

Bank Islam

Dubai Financial Group

Islamic Bankingand Finance

Institute Malaysia

PNB EPF

Syarikat Al-Ijarah SB

STMBBIMB

SecuritiesSB

Skim Amanah SahamBumiputera

epf

Source: Company

Pioneer Islamic financial institution. BIMB was established in 1997 as a holdingcompany for Malaysias pioneer shariah -compliant entities, although t he groupshistory actually dates as far back as 1983 with the incorporation of 51%-owned (as atend-2012) Bank Islam.

The latter was set up with an initial paid-up capital of MYR80m following theenactment of the Islamic Banking Act 1983 to create a competitive Islamic financialsystem. As Malaysia s first Islamic bank, Bank Islam became the first public-listedIslamic financial institution on the Main Board of the Kuala Lumpur Stock Exchangein 1992. By comparison, the countrys second Islamic bank, Bank Muamalat, is muchyounger, having been incorporated in 1999.

The groups 60% -owned takaful subsidiary, STMB, was incorporated in 1984 with aninitial paid-up capital of MYR10m, following the enactment of the Takaful Act 1984.STMB remains the first and only pure public-listed takaful operator in Malaysia.

A Tabung Haji arm. LTH, a 50-year old pilgrimage fund, is BIMB s ultimate

shareholder, with an aggregate holding of 51%. This partnership extends beyondinternational investors like the Dubai Financial Group (DFG), which invested about30% in Bank Islam as a result of a 2005 recapitalisation exercise.

BIMBs special relationship with LTH opens the door to immediate synergies,including business referrals for corporate financing, depositors, sukuk underwritingcapabilities and strong ties with Government-linked companies.

BIMB was formed to answer the call for asustainable Islamic financial system duringthe 1980s

The special relationship with its ultimateshareholder, LTH, allows for synergies


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Crown Jewel 1: Bank Islam Malaysia

Stronger after recapitalisation. Bank Islams transformation began after it reportedlosses of MYR0.5m and MYR1.3m in FY05 and FY06 respectively. Profits werewiped out by provisions, as its NPL ratios jumped to 20-22%. A recapitalisationexercise in Oct 2006 involved a MYR1bn capital injection from LTH and DFG.

This was followed by a clean-up of its balance sheet, the installation of a newmanagement team and full-scale reorganisation, as stipulated in its 3-yearturnaround plan (2006-2009). In 2009-2012, BIMB returned to profitability, withmargins stronger than ever. This was supported by substantial improvements infinancing growth, asset quality, risk management and operational processes. 2013marked the start of the group s H2E plan, which emphasised high, sustainablebusiness growth.

Highlights of key synergies. Bank Islam is the third-largest Islamic bank inMalaysia with assets amounting to MYR42bn and a customer base of >3.5m. Itsgrowth trajectory is that of a retail bank, as it is able to leverage on LTHs retail

network of 8.2m depositors. In the past, innovative and convenient initiatives wereintroduced to customers performing transactions between LTH and Bank Islamaccounts. Integration services of both accounts were also enforced through 68 ATMmachines at LTH branches. The bank also provides debit card services during theHaj season. It also leverages on financing demands from Government agencies, aswell as education financing for the Perbadanan Tabung Pendidikan Tinggi Nasional(PTPTN).

Figure 2: Effects of capital management on BIMBs financing growth and profits

-1,400.0

-1,200.0

-1,000.0

-800.0

-600.0

-400.0

-200.0

0.0200.0

400.0

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%50.0%

60.0%

June June June June June Dec Dec Dec

2005 2006 2007 2008 2009 18M2010 2011 2012

Net Pro fit (MYRm) (RHS) Ho useho ld Gro wth (%) (LHS)

Business Loans Growth (%) (LHS) Gross Loans Growth (%) (LHS)

Source: Company data

Bank Islam emerged as a stronger bank afterits makeover. The next phase of itstransformation is equally focused on highbusiness growth and sustainability

Bank Islams g rowth trajectory is that of aretail bank


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Industry Outlook: Islamic Banks

Islamic financing poised to expand. The Government is targeting to increaseIslamic financings share of total financing in Malaysia to 40% in 2020 from 29% in2010 in its aim to cement the countrys position as a global leader in this market. By2020, the Islamic finance industrys projected gross national income (GNI)contribution and job creation will be valued at MYR7.2bn and 11,600 respectively.The Government is also targeting to have at least one local Islamic financialinstitution to be among the Top 10 Islamic financial institutions in the world in terms ofassets by 2020. Initiatives implemented to achieve this goal include standardisingshariah guidelines, and the setting up a centre of excellence for Islamic financeresearch, development and education.

How the industry has fared so far. The Islamic finance industrys growth trajectoryis impressive. The sector recorded a double-digit growth of 13.8% in total assets toMYR495bn in 2012, or 23.8% of total assets in the overall banking (and developmentfinancial institutions) system. Furthermore, despite the numerous Islamic financeplayers, there is still room for the industry to grow. The market share of financing byIslamic banks was recorded at MYR315bn in 2012, accounting for only 25.8% of the

total financing market. The Islamic financing industry also recorded MYR386bn indeposits as at 2012, which made up a market share of just 25.6%.

Figure 3 : Malaysias Islamic banking and development financial institutions (DFI) landscape

Source: Company

The Government targets to increase Islamicfinancings share of total financing to 40% in2020

The sector recorded a 13.8% double-digitgrowth in total assets, accounting for 23.8%of assets in the total banking system


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Figure 4: Islamic finance is an ETP key entry point project (EPP)

Source: Prime Minister s Department

A global perspective. Malaysia has emerged as a leading global Islamic financialhub. In 2012, there was a 71% surge in sukuks raised to USD142.2bn vsUSD83.1bn in 2011. With local sukuk issuances accounting for >60% of total globalsukuk issuances, the Malaysian Islamic bond market remains the largest in the world.

Figure 5: Global Islamic banking landscape

Source: Company, IFN2013

Malaysia has emerged as a leading globalIslamic financial hub, accounting for 60% oftotal global sukuk issuances.


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Crown Jewel 2: STMB

No. 2 in the market. Based on Insurance Statistics Malaysia (ISM), STMB wasranked second among the 11 takaful players with a 20% market share. It is thedominant player in group family takaful products with a 40% market share (vs Etiqa's10%) in FY12. STMBs market leadership is attributed to its strong distributionchannels, partly due to its bancatakaful partnerships with financial institutions andproductive agency force. Bank Islam is one of its key bancatakaful partners for itsmortgage-reducing term takaful (MRTT) for house financing, group credit wakalah forpublic financing (PF) and automobile financing takaful plan for vehicle financing.

Pure proxy to sector growth. STMB is poised to expand in tandem with theindustry's anticipated ~20% growth, which is still superior to the conventional generaland life ins urance industries 5-6%. According to Bank Negara (BNM) statistics, thetakaful industry's income from net contributions jumped to 21% in 2012 (2011: 10%),surpassing the conventional industry's premium growth (2012: 9%; 2011: 5%).

Unique proposition. Given takaful s low penetration rate, STMB has invested wiselyin portraying itself as a leading "insurance provider that caters to all customersegments and does not target only bumiputera customers. We believe it is the onlylocal takaful player that consistently provides a unique value proposition of a 15%No Claim Rebate/Cash Back (NCR) to its customers . This is made possible by theample surplus in its general and family takaful risk funds. This year, the takaful operator is offering another 5% NCR (on top of the existing 15%) on all its non-motorpolicies maturing in 2013. (Please see the appendix section for the principals behindNCR)

Industry Outlook: Ta ka f u l

Under-insured. Insurance is also one of the Governments key entry point projects(EPPs) under the Economic Transformation Programme (ETP) that aims to have75% of Malaysians insured by 2020. Through this initiative, the penetration rate toGDP is projected to rise to 4% by 2020 from 2.8% in 2010. In the 2014 Budget, PrimeMinister Datuk Seri Najib Tun Razak proposed a contribution of MYR50 to the GroupTakaful Rakyat 1Malaysia (i-BR1M) for all BR1M ( Bantuan Rakyat 1Malaysia )household recipients, who will receive protection of up to MYR30,000 in the event ofdeath or permanent disability. These are key factors that will help spur growth oftakaful industry.

Figure 6: Islamic finance is a key EPP for the ETP

Source: Prime Minister s Department

STMB has the second largest market share(at 20%) in the takaful industry as at CY12

STMB is a pure proxy to the sectors latentgrowth potential

The NCR, essentially a form of profit-sharing,is STMBs unique proposition

The Government targets to increaseinsurance penetration (ie policies perpopulation) of Malaysia to 75% by 2020


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Industry performance so far. To date, the takaful sectors penetration rate is stillsignificantly lower than that of conventional insurance, contributing only 0.7% of GNIvs the conventional insurance industry's 4.1% share in 2012. Another measure of thepenetration rate (for family takaful ) is policies per population, which increased to 13%in 2012 from 8% in 2008. Nonetheless, this penetration is still lower than theconventional life insurance (LI) penetration rate of about 54%.

There is still room for the takaful industry to catch up to its conventional counterpart.Takaful assets as at 2012 were at MYR19bn, constituting approximately 10% of totalindustry insurance and takaful fund assets. The net contribution was MYR6bn,comprising about 14% of total conventional and takaful industry contributions.

Globally, takaful contributions are expected to record an annual growth of 15-20%,with the global takaful market anticipated to be valued at USD17bn by 2015. Despiteits smaller size, the MYR4bn Malaysian family takaful market (the equivalent ofconventional LI) is deemed as relatively sophisticated, accounting for a staggering73% of the global family takaful market. This is attributable to: i) a robust regulatorysystem, ii) the G overnments support to develop the Islamic financial industry, and iii)the latent demand for Islamic products within the region.

Figure 7: Conventional insurance penetration rates Figure 8: Takaful penetration rates

2.9

4.5 4.63.9

4.4 4.34.0 4.1

1.5

3.1 32.6

3 2.9 2.7 2.8

1.4 1.4 1.3 1.3 1.4 1.4 1.3 1.30.

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1990 2006 2007 2008 2009 2010 2011 2012Premium (% of GNI ) LI ( % of GNI ) GI ( % of GNI )

0.40.4

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0.6 0.60.7

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.

.

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2007 2008 2009 2010 2011 2012Contributions (% of GNI) Family (% of GNI)General (% of GNI)

Source: BNM Source: BNM

Figure 9: Conventional insurance premium income Figure 10: Takaful premium income

3,170

24,886 27,080 27,720 29,208

31,933 33,678 36,689

92

644 695 676 711 770 787 850

111 362 369 393 413 445 469 501

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1990 2006 2007 2008 2009 2010 2011 2012Premium Income (MYRm) LI (MYR) GI (MYR)

2,565 3,025

3,522

4,4224,863

5,888

73.385.7

97.4119.8 127.7

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2007 2008 2009 2010 2011 2012Contributions (RMm) Family General

Source: BNM Source: BNM

The regulatory landscape. Currently, there are 11 takaful operators in Malaysia, ofwhich eight are composite licensees (ie principally involved in both general and familytakaful operations). The Islamic Financial Services Act 2013 (IFSA), enacted on 30June, requires all composite takaful players (including STMB) to separate the generaland family takaful operations by mid-2018. That said, the local takaful industry isexpected to see some M&A activities over the next few years. We note that theminimum paid-up capital requirement for a takaful entity remains unchanged atMYR100m.

Given the 5- year timeline, it is too early to ascertain STMBs steps in responding tothe IFSA requirement. Nonetheless we believe that the BIMBs takaful subsidiary iscommitted to keeping both its general takaful and family takaful businesses.

Conventional insurance penetration was low.LI penetration stood at 2.8% to GNI, whilegeneral insurance (GI) penetration was 1.3%to GNI.

Takaful penetration was much lower than itsconventional counterpart, whereby familytakaful was at 0.6% to GNI and generaltakaful was at 0.1% to GNI.

The IFSA enforces a provision requiring alleight composite takaful players to separatetheir businesses within a 5-year timeline.

Net contributions MYRm


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Investment Highlight 1: Plugging The Minority Leakages

Taking full control of Bank Islam. In August, BIMB announced its acquisition of theremaining 49% stake in Bank Islam from both DFG and LTH. The cash considerationrequired was approximately MYR2.86bn (ie MYR1.78bn for DFGs stake andMYR1.08bn for LTHs stake ). To fund the acquisition, BIMB planned a rights issue(RI) of 426.7m new shares and 426.7m warrants, each on a 2 -for-5 entitlement basis.The group also planned to raise a 10-year Islamic debt of up to MYR2.1bn in nominalvalue. The total MYR2.9bn proceeds were raised at an approximate 60:40 ratiorepresenting equity:debt.

Figure 11: Gross proceeds to be raisedFundsraised

(MYRm)RI with warrants 1,813.54Sukuk 1,086.47Total 2,900.01

Source: Company s abridged prospectus dated 12 Nov 2013

Acquired at reasonable value. The acquisition was valued at 1.8x P/BV, premisedon MYR3.3 bn shareholders fund of Bank Islam at as 3Q13. We see it as in line withthe average transaction multiple of the banks in Malaysia.

Figure 12: Comparable bank acquisitions

Acquiree Acquiror P/BV P/EDate

announcedDate

completedStake (%)

Malaysian Plantations Vertical Theme SB 2.11 18.39 May-04 Mar-05 30.0%Southern Bank Bumiputra Commerce 2.07 21.24 Oct-05 Nov-06 100.0%

AMMB ANZ Funds Pty Ltd 2.01 21.14 Nov-06 May-07 14.0%Bank Muamalat DRB-HICOM 2.07 31.74 Oct-07 Oct-08 70.0%EON Capital Primus Pacific Partners 2.21 31.15 Feb-08 Jun-08 20.0%

RHB Capital Abu Dhabi Commercial 2.20 21.75 May-08 May-08 25.0%EON Capital Hong Leong Bank 1.42 11.97 Dec-09 May-11 100.0%

Weighted Average 1.96 20.09High 2.20 31.74Low 1.42 11.97

(Proposed)Bank Islam BIMB 1.88 29.89 Aug-13 Dec-13 49.0%

-4.29% 48.75%Accretion / (Discount) to the weighted averagetransaction multiple (%)

Source: Companys circular to shareholders dated 2 Oct 2013

Absorbing full impact of Bank Islams profit s. We welcome this exercise as we

see BIMBs FY1 4F net profit being enhanced by 65-78% post acquisition. This will bemostly due to the recognition of Bank Islams earnings previously ceded to minorityinterests. Profits will be offset by an estimated MYR75m financing expense (beforetax) from the sukuk issuance.

The deal is highly EPS- and ROE-accretive, assuming the non-conversion of thewarrants. On a fully-diluted basis, the deal is expected to be EPS- and ROE-neutral.Book value per share is also expected to be neutral upon full dilution.

The RI was priced at MYR4.25, revised fromthe earlier indicative price of MYR3.60, at anunchanged 10% discount on a highertheoretical ex-price

The deal is expected to enlarge BIMBscurrent fully-diluted share capital by 80%


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Figure 13: Impact of proposed RI and s u k u k on BIMB s financials

MYRm MYRm MYRm MYRm CommentsProfit and LossNet profit of BIMB 143.7 314.5 314.5 314.5

Add: 49.0% Bank Islam net profit na na 224.7 224.7 Bank Islam made 9M13 profit of MYR343mSubtract: Financing expense of Sukuk na na -74.7 -74.7 Based on 6.25% p.a. for MYR1.19bn Sukuk

Add: Interest from excess funds @ 3.0% na na 0.6 43.8 Assume @ 3.0% earned on the excess fund fromNet profit, excluding STMB's profits to MI na na 517.6 560.8 warrants conversion, after deducting the consideration

of MYR2.96bn, listing expenses and stamp dutyEarnings accretion (%) 64.59% 78.33%Balance SheetShare capital 1,066.8 1,066.8 1,493.5 1,920.2 A 2-for-5 rights issue and a 2-for-5 issuance of warrantsShare premium 603.6 603.6 1,462.3 3,576.0 RI price of MYR4.25 is at 10.0% discount to the TERP of MYR4.72Retained earnings 358.7 662.4 758.0 801.2Warrants reserve 0.0 0.0 526.3 0.0

Acquisition and other reserves 0.0 0.0 -1,348.8 -1,348.8Other reserves 71.7 71.7 -91.8 -91.8 Our scenario here reflects accumulated lossesTotal shareholder's fund 2,100.9 2,404.5 2,799.6 4,856.9

Gross proceeds (MYRm) n.a. n.a. 2,900.0 2,900.0

Impact to FY14F P/EEPS (sen) 26.94 29.48 34.65 29.20EPS accretion (%) 17.56% -0.93%P/E (x) 15.59 14.25 12.12 14.38

Impact to FY14F P/BV, ROEBV per share (MYR) 1.97 2.25 1.87 2.53BV accretion (%) -16.84% 12.22%P/BV (x) 2.13 1.86 2.24 1.66ROE (%) 13.3% 13.7% 15.0% 11.8%ROE accretion/ (dilution) (ppts) 1.31 -1.85

After RI a ndacquisition

of Bank

After fullconversion of

warrantsAs at 2Q13RHBRI FY14F

forecast

Source: Companys Abridged Prospectus dated 12 Nov 2013, RHBRI estimates

Key businesses complement each other. Bank Islam is BIMBs main driver,contributing 80-89% of group revenue and PBZT in each for the past three financialyears. The successful turnaround of BIMB s banking unit has paved the way for itssustainable growth path until 2016, where it is expected to achieve above-industrygrowth.

Similarly, the takaful unit provides another key income driver (at approximately 10-20% of group revenue and PBZT). While the earnings contribution is not as large asits core banking unit, STMB s pre-tax ROA at ~2% tends to be higher than the~1.6% achieved by Bank Islam. Its profitability surged following the adoption of thewakalah business model, as well as its success in capturing more market sharewithin the takaful industry.

We believe the Bank Islam stake acquisition is timely as it signals that BIMB, theholding company, will be taking full advantage of the future growth trajectory of itsbanking unit and will have complete control over potential restructuring exercises.

Long-term ROE set to increase. As we see strong earnings growth in both BankIslam and STMB on the long-term, we see accretion on the longer run ROE postacquisition. In the near-term, we expect ROE to be dilutive upon the completion ofthe exercise in end-CY13.


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Figure 14: BIMBs core ROE (diluted basis) Figure 15 : BIMBs core ROA

9.9%

10.6%

12.0%

13.1%

14.1%

11.8%

12.5%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

2009 18M2010 2 011 2012 2013F 2014F 2015F

ROA (%)

0.4%0.5%

0.6% 0.6% 0.6%

1.0% 1.0%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

2009 18M2010 2011 2012 2013F 2014F 2015F

Source: Company data Source: Company data

Figure 16 : BIMBs s egmental analysis by revenue

83.7% 83.9% 83.5% 84.7% 84.7% 84.6% 82.3% 82.2% 82.3% 81.8% 79.1% 77.7% 77.0% 79.1%80.8% 79.1% 79.4%

16.0%15.9% 16.3% 15.8% 15.1% 15.1%

17.4%

17.5% 17.3% 17.8%20.4%

21.9% 21.0% 20.5%

19.0%20.5% 20.2%

0.8%3.4% 2.6% 1.5% 2.3% 1.9% 0.6%

6.9% 7.0% 5.6%0.6%

4.3% 7.1% 7.4%0.9%

3.5% 2.7%

-20%

0%

20%

40%

60%

80%

100%

3M10 6M10 9M10 12M10 15M10 FY10 1Q11 1H11 9MFY11 FY11 1Q12 1H12 9M12 FY12 1Q13 1H13 9M13

Banking Takaful Elimination Others Source: Company data

Figure 17 : BIMBs segmental analysis by PBZT

83.5%84.7% 83.8% 87.2% 88.1%

88.6% 79.0%

83.9% 86.0% 83.4%78.1%

81.7% 79.2% 83.6%

79.7%80.2% 79.5%

16.8%

16.0% 16.5% 13.3% 12.5% 12.2% 19.5%

16.6% 14.4%17.2%

22.4%

18.8%16.0% 17.0%

21.1%

20.6% 21.2%

0.0%

7.3% 5.6% 4.2% 4.9% 3.6%

-0.3%

20.2%21.9%

16.7%

-0.5%

12.1% 21.8% 23.3%

0.3%

9.1% 6.7%

-20%

0%

20%

40%

60%

80%

100%


Elimination Banking Takaful Others Source: Company data


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Figure 18 : BIMBs segmental analysis by asset

85.1%85.3% 85.1% 86.4% 86.4% 85.4% 83.9% 84.0% 83.5% 84.2% 83.5% 84.0% 84.4% 85.2% 86.0% 85.3% 86.0%

0.0%14.7% 14.5% 14.7% 13.4% 13.4% 14.0% 15.8% 16.8% 15.8% 15.4% 16.3% 15.6% 15.2%

14.4% 13.9% 14.5%

6.0% 5.8% 5.9% 5.2% 5.2% 5.4% 5.5% 5.7% 5.5% 5.0% 5.6% 5.1% 5.1% 4.9% 4.3% 4.5% 4.2%

-20%

0%

20%

40%

60%

80%

100%


Elimination Banking Takaful Others Source: Company data

Figure 19: BIM Bs PBZT margin by group level banking (Bank Islam) and t akafu l (STMB)

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%


To tal Bank ing Tak aful


Figure 20: BIM Bs pre -tax ROA by group level banking (Bank Islam) and t akafu l (STMB)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%


Total Bank ing Takaful



15/50


16/50



Figure 24 : BIMBs 2013 household financing market share is small compared with other commercial and Islamic banks

0.3% 0.3%2.3% 2.5% 2.5% 2.8% 3.2%

3.5% 4.5%

7.0% 8.0%

9.2%

13.1%

19.7%

21.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Al-RajhiBank

KuwaitiFinanceHouse

Af f in BankIslam

AFG StandardChartered

HSBC OCBC UOB AMMB RHB HLBK CIMB PublicBank

Maybank

Source: Companies data

More details on household financing. Around 74- 76% of the groups financingportfolio was mainly from household segments, which includes house financing(HFA), personal financing (PF) and motor financing. PF constituted the largestproduct segment, forming about 32% of its total financing portfolio (or 43% of itshousehold financing) as at 2Q13 (FY12: 33% of total; 42% of household). This wasfollowed by HFA (28%) and vehicle financing (12%).

Typically, commercial banks face intense competition in mortgages and corporatefinancing, which command lower yields. BIMB, on the other hand, has a higherexposure to PF. For instance, its PF was typically charged at a 3.99% flat rate perannum, translating into an effective interest rate of 6-7%. This is higher thanmortgage rates, which were premised on the base lending rate (BLR) minus 2.4%.

Figure 25 : BIMBs financing portfoli o as at 9M13 Figure 26 : BIMBs financing portfolio as at 4Q12

1%

0%

4%

1%

3%5%

3%

1%

7%

1%

74%

0%Primary Agriculture

Mining and Quarrying

Manufacturing (and Ag ro)

Electricity, Gas & Water

Wholesale, Retail

Construction

Real Estate

Transport, Storage &CommunicationFinance, Insurance

Education, Health, Social

Household

Others

1%0%

5%

1%3% 9%

3%

1%2%

1%

74%

0%Primary Agriculture

Mining and Quarrying

Manufacturing (and Agro)

Electricity, Gas & Water

Wholesale, Retail

Construction

Real Estate

Transport, Storage &CommunicationFinance, Insurance

Education, Health, Social

Household

Others


PF is the largest growth driver and offers oneof the highest return rates in its financingportfolio. The table below illustrates the profitmargin of one of BIMB s PF products.

PF - NonPackage

1-3 years :6.0% p.a.(Flat)

4-8 years :6.8% p.a(Flat)

9-10 years: 7.0% p.a.(Flat)

Profit Margin


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Figure 27: Bank Islam household financing composition as at2Q13

Figure 28: Bank Islam household financing composition as at4Q12

38%

43%

16%

3% 0%

House financing

PF

Vehicles

Credit card

Ar Rahnu

38%

42%

17%

3% 0%

House financing

PF

Vehicles

Credit card

Ar Rahnu


Figure 29: Around 75% of financing customers are individuals

0.0

5000.0

10000.0

15000.0

20000.0

25000.0

1Q10 2Q10 3Q10 4Q10 5Q10 6Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

MYRm

D omes tic No n-Bank s D omes tic Bus ines s Enterp ris e Small Med ium Ind us triesGovernment Statutory Bodies Individuals Other Domestic EntitiesForeign Entities


Sustainable PF growth. While the industry is expected to face headwinds after thecentral bank capped the maximum tenure of PF to 10 years from 25 years (effective5 July) , we still expect BIMBs PF to be a key growth driver. Amid the slowdown inindustry growth, we believe that the group s already conservative underwritingguidelines may help take market share from other PF players, which are beginning toadjust to the new competitive landscape. PF remains a strong growth driver asshown in its 3Q13 results.

Prio r to July, BIMBs PF average tenure is only 7 -8 years, which is already in linewith the revised guidelines. This is more conservative than the market practice of20 years at the same period

BIMBs PF growth has less downside risk, as its concentration risk ismanageable. PF makes up 34% of its 2Q13 total financing portfolio. Thiscompares to 70% in Malaysian Building Society (MBS MK, BUY, FV: MYR3.40),and 24% in AEON Credit Service (ACSM MK, BUY, FV: MYR18.10). BankRakyat the biggest PF player targets to trim its PF to 80% from around 82%as at June, based on covered reports.

BIMB is expanding into the private sector, which predominantly comprisesGovernment-linked corporations (GLCs), public-listed companies and selectedprivate companies. Some of its target customer segments in the private sectorinclude medical practitioners, engineers, accountants and professionals from theoil and gas (O&G) industry and the mass affluent.

>90% of its PF is packaged. R epayments are secured by automatic deduc tionsor salary transfers, which are non-discretionary from the borrowers perspective.

We think the growth trajectory in the PFportfolio is resilient, albeit moderate amidregulatory changes


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All in, we reiterate our view that BIMB may capture market share from some ofits peers, which have tightened their loan application criteria, eg Bank Rakyatlimits certain PF products to a 3-year tenure. We also note that the groups floating-rate financing products are among the most attractive products offered inthe market.

Figure 30: 62% of total PF is attributed to Government and Government agencies

Source: Company

Figure 31: 28% of total PF is attributed to GLCs and O&G companies

Source: Company

More conservative financing criteria. We wish to highlight in detail that BIMB sapplication criteria is more stringent than the industry average. For PF packages (seeFigures 32-33), our channel checks from various industry players effective afterBNMs 5 July measures show that:

BIMBs debt service ratio (DSR) is lower than its peers at 40% vs the i ndustrysmedian of 60%. It allows a DSR of up to 75% for quality customers or forapplications with house collaterals (from existing mortgage customers).

A key reason for the low DSR is BIMBs higher requirement for minimum take-home pay (net off deductions) of around MYR1,000 for customers in the KlangValley and MYR750 for non-urban customers.

BIMBs household financing criteria are stillmore conservative than the industry s, basedon channel checks


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The financing amount is capped at 30x salary. For financing amounts>MYR150,000, the minimum income is MYR120,000 per annum.

As a result, BIMBs minimum salary (including allowances) requirement ofMYR2,000-MYR3,500 for all PF offerings ( Package and Non Package ) ishigher than the industrys median of MYR1,500 -2,000. Moreover, we understandthat the group may reject customers whose fixed allowances become non-recurring in nature.

Figure 32: Comparison of PF packages, after BNM s measures on 5 July

Lenders of PFProfit rate (most rates are inclusive of

takaful/ insurance coverage)Financing

amount (MYR)

Debt ServiceRatio (DSR)

(%)

Minimummonthly

salary (MYR)

Maximumtenure (after5 July 2013) Notes

1-3 years 3.25% flat rate4-10 years 4.99% p.a. flat rate

1-3 years BFR-1.70% float rate4-10 years BFR-0.40% float rate up to MYR200,000


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Figure 33: Comparison of PF packages, prior to BNM measures on 5 July

Lenders of PF Profit rate

Maxfinancing

(MYR)

Debtservice

ratio(DSR) (%)

Minmonthly

salary(MYR)

Maxtenure(years) Notes

1-3 years 3.30% p.a. flat rate4-10 years 3.85% p.a. flat rate

*4-20 years 3.98% p.a.flat rate MYR200,000


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Floating-rate financing gains popularity. BIMB has a target float:fixed ratefinancing at 60:40. Since the introduction of the floating-rate PF in 2012, its float:fixedfinancing was at 58:42 in 3Q13, vs 17:83 as at end-FY10. We view this strategypositively, as our economist expects the overnight policy rate (OPR) to be raised by25bps from the current 6.6% towards 2H14. The floating-rate feature will hedge thegroups long-term financing against adverse interest rate movements. Traditionally,

>80% of BIMBs financing portfolio is above one year in tenure.

However, this may come at a cost asset yields may be compressed. BIMBsfloating-rate financing typically carries a 100bps discount in profit rate vs that of fixedrate financing. This is to account for the additional risk of absorbing fluctuations ininterest rate movements. We understand that, for higher-quality customers, BIMBmay offer more attractive floating rate discounts at 150bps to the fixed-rate financingequivalent. We expect the floating rate financing to go beyond the 60:40 target ratiodue to its attractive features.

Figure 34: Financing portfolio the link between tenure, floating rate features and asset yield

66.8% 67.0% 66.9% 70.2%83.1% 81.2% 81.2% 83.3% 81.7% 82.6% 84.0% 82.7% 84.6% 84.4% 86.6%

33.2% 33.0% 33.1% 29.8%16.9% 18.8% 18.8% 16.7% 18.3% 17.4% 16.0% 17.3% 15.4% 15.6% 13.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY01 FY02 FY03 FY09 6Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

Long term (>1 year) Short term (


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Property financing mainly for affordable segment. In its 3Q13 results, BIMBrevealed that its property financing segment is growing at an annualised pace of23%. The group offers house financing of >MYR250,000 for properties in urbanareas. Some of its home loans catered to affordable housing includes the Baiti HomeFinancing-i and Wahdah Home Refinancing-i . Based on its recent advertisement,both products cater to low- to mid-end customers via two forms of residential property

purchases:

i. SJKP Scheme , which prioritises purchases of low-cost and medium-costproperties with value up to MYR150,000. Including takaful, the maximummargin of financing allowable is 100.0%. Other conditions include theminimum monthly income requirement of MYR1,000, and it has to be firsthouse financing for own ers occupancy.

ii. My First Home Scheme , catered for purchases of residential properties withvalue up to MYR400,000. A key criterion is that a single customers monthlyincome must not exceed MYR5,000. The margin of financing is up to105.0% including takaful.

Renewed focus on corporate financing. Currently, its corporate financing portfoliois enjoying modest growth, at 20% y-o-y. To support ample diversification of theportfolio, Bank Islam sees opportunities from the new Securities Commissionguideline for shariah compliance in public-listed companies on refinancingconventional loans into s hariah -compliant ones.

Investment Highlight 3: Financing Margins Compression to Moderate

Traditionally, NIMs are supported by low COF. Based on Figure 35, BIMB hadamong the highest NIMs (YTD: 2.91%; FY12: 3.26%) in 3Q13 while its COF isgenerally lower than most of its peers (YTD: 2.23%; FY12: 1.98%). The low COF wasattributed to its higher proportion of low-cost CASA vs the ind ustrys 25%.

Average yields from its interest-bearing assets (YTD: 4.79%, FY12: 4.96%) wasmainly attributed to profit margins from its high exposure to a retail portfolio thatcomprises household financing and PF. For instance, a 10-year PF offered to publicand private sector customers bear a 4.99% interest rate per annum, which directlytranslates into a 7.1% effective yield.

NIMs compression should stabilise. We believe the NIMs should stabilise after afew quarters of compression (see Figure 34). We opine that: i) the floating ratefinancing portfolio has expanded close to the groups optimum target, and ii) theCASA ratio is expected to maintain at current levels, thereby the upward pressure inCOF is already priced in. We also believe BIMBs NIMs will remain consistently onthe top range of the industry s NIMs due to the groups higher proportion of retailproducts within its portfolio.

Some of its property financing products areaimed at affordable housing, which appearsto be targeted at the affordable segment

BIMBs COF was traditionally lower than thatof peers due to its high CASA composition,resulting in superior NIMs

While competition is inevitable, we expectBIMBs NIMs to stabilise after a bout ofcompression. We expect its NIMs to remainabove that of its peers


23/50



Figure 35: 3QCY13 peer comparison NIMs, COF, asset yields Figure 36: 4QCY12 peer comparison NIMs, COF, asset yields

2.23 2.31 2.12.48 2.48

3.15 3.21

2.33

4.79 4.634.43

5.29

4.35

5.415.06

4.44

2.91

2.43 2.51

2.91

2

2.68

2.072.27

0

1

2

3

4

5

0

1

2

3

4

5

6

7

8

9

BIMB PublicBank

Maybank CIMB HongLeong

AMMB Affi n AFG

COF (%) Asset Yield (%) NIMs (%)

1.982.37

2.062.54 2.5

3.16 3.21

2.41

4.96 4.744.39

5.52

4.39

5.45 5.15

4.69

3.26

2.48 2.48

3.08

2.02

2.61

2.152.48

0

1

2

3

4

5

0

1

2

3

4

5

6

7

8

9

10

BIMB PublicBank

Maybank CIMB HongLeong

AMMB Affi n AFG

COF (%) Asset Yield (%) NIMs (%)

Source: Companies Source: Companies

Investment Highlight 4: Sustaining Low-Cost Deposit Base

High CASA ratio. BIMBs low COF was attributed to it having the highest CASAcomposition among the Islamic and commercial banks in Malaysia. For the past threeyears, its CASA ratio of 36-47% has been consistently above the 25% average forthe banking and Islamic finance industries.

Stable deposit base. The group had a high proportion of corporate deposits vs

individual. Retail customers accounted for 14% of total depositors in the latestquarter, down from the quarterly average of 16-18% in the past two financial years.Bank Islam offers various campaigns (such as monthly and quarterly prize draws) toimprove penetration into the retail depositors segment. Nonetheless, we believeBIMBs major corporate deposit s are long-term and should account for a solid 20-25% of recurring deposits, which we understand is sourced from regular depositorssuch as LTH, GLCs, Government agencies and religious associations.

Figure 37: CASA ratio BIMB vs industry

38.0%36.4%

38.7% 37.2%

42.0%39.8%

44.3% 45.2%

42.9% 43.5%

47.2%

41.9%

39.3%

41.4%

35.5% 36.7%

35.4%

20%

25%

30%

35%

40%

45%

50%

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0 9

N o v - 0

9

D e c - 0

9

J a n - 1

0

F e b - 1

0

M a r - 1 0

A p r - 1 0

M a y - 1

0

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1 0

N o v - 1

0

D e c - 1

0

J a n - 1

1

F e b - 1

1

M a r - 1 1

A p r - 1 1

M a y - 1

1

J u n - 1

1

J u l - 1 1

A u g - 1

1

S e p - 1

1

O c t - 1 1

N o v - 1

1

D e c - 1

1

J a n - 1

2

F e b - 1

2

M a r - 1 2

A p r - 1 2

M a y - 1

2

J u n - 1

2

J u l - 1 2

A u g - 1

2

S e p - 1

2

O c t - 1 2

N o v - 1

2

D e c - 1

2

J a n - 1

3

F e b - 1

3

M a r - 1 3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

2010 2011 2012 2013

BIMB CASA Islamic Banks, CASA Commercial Banks, CASA



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Investment Highlight 5: Commendable Non-Financing Income Base

Significant contribution from STMB. BIMBs NFI contributed 40% to its totalincome as at 3Q13, vs around 30% in FY08-10. The bulk of its ancillary incomecomes from strong contributions from STMB, its takaful subsidiary. Following theadoption of the wakalah model and its ability to capture market share in profitableretail products, STMB has recognised a fuller extent of its wakalah income sinceFY11. As a result, its contribution to BIMBs total NFI was as high as 68% in thecurrent quarter, and in the 56-68% range since 2Q11.

Figure 40: NFI to total income (yearly)

48.2% 49.0%

43.0%

21.7%

30.9%

35.7%31.7%

63.3%

34.9%32.2% 31.8%

39.4% 38.8%

20.0%

25.0%

30.0%

35.0%

40.0%45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 18M2010 2011 2012

Cost-to-Income Ratio (%)


More avenues for non-financing income growth. As mentioned earlier, non-fundbased income, which is mostly fee-based, eg commissions and management fees, isnormally not included in profit-sharing to depositors. Therefore, in theory, stronggrowth in NFI ought to translate into a direct upside for the group s earning s outlook,as it is treated as full income. Bank Islam targets NFI to account for 15% of its totaltopline by 2015 (excluding STMBs contribution ). Its strategies include:

Promoting bancassurance, wealth management and foreign exchange servicesamong retail customers

Enhancing merchant and fee revenue from mobile banking, credit cards and itsrebranded Team Harimau debit cards

Maintaining a strong pipeline in the capital market and deal flows

The takaful subsidiary, STMB, contributedabout 68% of NFI as at 9M13

Fee-based income, otherwise largely knownas non-fund based income, is normally notrequired to be distributed to mudharabah depositors

Bank Islam was the first Malaysian bank tolead-arrange and manage the issuance ofUSD-denominated international Islamicsecurities


25/50



Figure 41: NFI to total income (quarterly)

33.7% 33.9%

29.7%27.7%

29.0%

35.0% 35.0%37.2%

32.0%

44.3%

40.4%43.0%

38.8%40.6%

38.4%

41.5%40.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

1Q10 2Q10 3Q10 4Q10 5Q10 6Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

Nonfinancing Income (NFI)


Figure 42: NFI breakdown in 9M13 Figure 43: NFI breakdown in FY12

2%

10%1%

19%

67%

0% 1% - Net income from Trading

- Foreign Exchange, DerivativeTransactions

- Dividend Income

- Net Fees and Commission

- Income from Takaful Business

- Gain on disposal

- Others

9%

6% 1%

17%

62%

4% 1% - Net income from Trading

- Foreign E xchange, DerivativeTransactions

- Dividend Income

- Net Fees and Commission

- Net Income from TakafulBusiness

- Gain on disposal

- Others



26/50



Investment Highlight 6: Improved Asset Quality

NPL improves significantly. The groups asset quality has improved substantially.Its gross NPL ratio dipped to 1.39% in 3Q13 from a high of 22% seen in FY06-07.

Back then, risky financing for corporate businesses exposed to the 1997/98 financialcrisis believed to have originated from: i) property financing, ii) purchases ofsecurities, and iii) business segments like manufacturing and construction were themain causes of the substantially high impaired financing.

We note BIMBs NPL indicators are now superior to the corresponding figures of thecommercial banking and Islamic banking industries, as at end-2011. This is due tomore prudent monitoring of its financing portfolio, and more stringent creditunderwriting standards.

Figure 44: Gross NPL ratios BIMB vs industry

12.69%11.78%

11.31%

7.64% 7.32%

4.50% 4.29% 4.20% 4.01%

2.61% 2.30% 1.96% 1.74% 1.55% 1.49% 1.36% 1.39

0%

2%

4%

6%

8%

10%

12%

14%

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0 9

N o v - 0

9

D e c - 0

9

J a n - 1

0

F e b - 1

0

M a r - 1 0

A p r - 1 0

M a y - 1

0

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1 0

N o v - 1

0

D e c - 1

0

J a n - 1

1

F e b - 1

1

M a r - 1 1

A p r - 1 1

M a y - 1

1

J u n - 1

1

J u l - 1 1

A u g - 1

1

S e p - 1

1

O c t - 1 1

N o v - 1

1

D e c - 1

1

J a n - 1

2

F e b - 1

2

M a r - 1 2

A p r - 1 2

M a y - 1

2

J u n - 1

2

J u l - 1 2

A u g - 1

2

S e p - 1

2

O c t - 1 2

N o v - 1

2

D e c - 1

2

J a n - 1

3

F e b - 1

3

M a r - 1 3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

2010 2011 2012 2013

BIMB, GNPL/GL Commercial Banks, GNPL/GL Islamic Banks, GNPL/GL Source: Company data, BNM statistics

Figure 45: Net NPL ratios BIMB vs industry

4.82% 4.98%

4.11%

3.29%

2.67%

3.99%3.73% 3.72%

3.34%

2.15%1.87%

1.57%1.38% 0.93% 0.88% 0.79%

0.79

0%

1%

2%

3%

4%

5%

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0

9

N o v - 0 9

D e c - 0 9

J a n - 1

0

F e b

- 1 0

M a r - 1 0

A p r - 1 0

M a y - 1 0

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1

0

N o v - 1 0

D e c - 1 0

J a n - 1

1

F e b

- 1 1

M a r - 1 1

A p r - 1 1

M a y - 1 1

J u n - 1

1

J u l - 1 1

A u g - 1

1

S e p - 1

1

O c t - 1

1

N o v - 1 1

D e c - 1 1

J a n - 1

2

F e b

- 1 2

M a r - 1 2

A p r - 1 2

M a y - 1 2

J u n - 1

2

J u l - 1 2

A u g - 1

2

S e p - 1

2

O c t - 1

2

N o v - 1 2

D e c - 1 2

J a n - 1

3

F e b

- 1 3

M a r - 1 3

A p r - 1 3

M a y - 1 3

J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

2010 2011 2012 2013

BIMB NNPL/NL Commercial Banks NNPL/NL Islamic Banks NNPL/NL

Source: Company data, BNM statistics

The groups gross NPL declined substantiallyfrom 2007. Its gross NPL and net NPL ratiosare now better than the industry s


27/50



Figure 46: Gross NPL by economic purposes for FY06 and FY08


Figure 47: Gross NPL by economic purposes for 4Q11, 4Q12 and 2Q13

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0% 4Q11 4Q12 2Q13

Source: Company

Substantial recoveries and writeoffs. Aside from improved financing monitoringstandards and controlled formation of new NPLs, we note that the clean-up of BIMBs balance sheet was largely supported by significant recoveries and writeoffs in legacyfinancing during the 2006-2012 period. The proportion of gross NPL from pre-2006financing declined by 62% accounting for just 48% of the combined pre- and post-2006 gross NPL from 69% in CY10 (see Figures 67-69 for the summary of thefinancing quality indicators).

Figure 48: NPL has been on a decline since 2007, following the grou ps efforts to clean up its balance sheet

15.0% 15.9%20.4% 22.2% 22.4% 18.7%

12.7%4.5% 2.6% 1.5%

9.5% 10.3% 13.2% 9.4% 11.7% 8.0% 5.0% 4.0% 2.1% 0.9%

21.9% 18.7%

39.1%

11.4%

-3.4%-11.1%

-30.2%

-59.4%

-31.2%

-18.7%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

June June June June June June June Dec Dec Dec

2003 2004 2005 2006 2007 2008 2009 18M2010 2011 2012

GNPL/GL (LHS) NNPL/NL (%) (LHS) NPL growth (RHS) Source: Company data

The bulk of NPLs during FY06-08 was frommortgages, purchase of securities,construction and manufacturing segments

Continued improvements in NPL ratiosacross both household and business

segments

Large recoveries and writeoffs led to thedecline in NPL ratios


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Household financing of good quality. Household NPLs account for about 50% oftotal NPLs (FY06: 40%), given BIMB s: i) strong household financing growth, and ii)reduced product mix in corporate financing. That said, we deem the NPLmanagement healthy. The gross NPL for consumer banking dipped to 0.9% CY12from 2.0% in CY11, while that of corporate banking dipped to 2.7% from 4.5% inCY11. In 2012, the gross NPL of the system s household lending ended at 1.5%. For

PF, the gross NPL of the banking and NBFI industry came in at 1.8% and 1.6%respectively in 2012.

Figure 49: Composition of business and household segments for financing (top) and NPL (bottom)

55.6% 49.0% 45.1% 39.1%31.9% 30.7% 33.8% 30.5% 24.1% 24.4% 26.3%

44.4% 51.0% 54.9% 60.9% 68.1% 69.3% 66.2% 69.5% 75.9% 75.6% 73.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

June June June June June June June June Dec Dec Dec

2002 2003 2004 2005 2006 2007 2008 2009 18M2010 2011 2012

Co rp orate and small -med ium enterp ris es Ho us eho ld

63.3% 58.2% 59.2% 57.1% 59.6% 65.0% 63.7%

75.1%

51.0%42.8% 48.4%

36.7% 41.8% 40.8% 42.9% 40.4% 35.0% 36.3%

24.9%

49.0%57.2% 51.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

June June June June June June June June Dec Dec Dec

2002 2003 2004 2005 2006 2007 2008 2009 18M2010 2011 2012

Co rp orate and s mall-med ium enterp ris es Ho us eho ld


Figure 50: NPLs by key segment (quarterly)

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1Q10 2Q10 3Q10 4Q10 5Q10 6Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

Y m

Manufacturing (and Agro) Construction Household Gross NPL Source: Company data

The groups improvement in gross NPLportfolio was attributed to: i) manageableNPLs in its retail portfolio, and ii) reducedproduct mix in corporate financing


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Prudent provisioning. We observe that BIMBs coverage ratio ha s been trendingupwards and has been more prudent than the banking industrys average since end -FY11. Its LLC in 3Q13 stood at 159%.

The change in provisioning recognition in FY10, in line with FRS139 standards,prompted Bank Islam to revise its NPL classification to 3-month-past-due basis (from

6-month-past-due basis). Its collective allowance ratio, therefore, climbed to 2.91%as at Dec 2010, and has since been on a decline.

Figure 51: LLC BIMB vs industry

77.7% 74.1% 79.9% 78.3% 85.3%

76.8% 78.6% 78.8% 83.6%

106.2%117.6%

126.8% 130.5%142.6%

154.0%163.8% 159.1%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

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N o v - 0 9

D e c - 0 9

J a n - 1

0

F e b

- 1 0

M a r - 1 0

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1

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- 1 3

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J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

2010 2011 2012 2013

BIMB LLC Commercial Banks LLC Islamic Banks LLC


Figure 52: Collective allowance over total net financing BIMB vs industry

1.68% 1.63% 1.61% 1 .5 2% 1 .5 2%

2.91%2.78% 2.80%

2.66%

2.31% 2.29%2.11%

1.92%

1.61% 1.71% 1.68% 1.63%

0%

1%

1%

2%

2%

3%

3%

4%

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

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N o v - 0

9

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9

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0

F e b

- 1 0

M a r - 1 0

A p r - 1 0

M a y - 1

0

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0

J u l - 1 0

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0

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0

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0

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- 1 1

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1

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1

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1

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1

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1

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- 1 2

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2

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2

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2

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2

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2

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3

F e b

- 1 3

M a r - 1 3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

2010 2011 2012 2013

BIMB CA/NL Commercial Banks CA/NL Islamic Banks CA/NL

Source: Company

Moderate credit cost assumptions. BIMBs credit costs eased considerably from ahefty 115-169 bps in FY09/10 to 14-33bps in FY11/12, as its asset quality is now inline or better than the industry average. Moving forward, management has guided fora more normalised credit cost of ~40bps.

Annualised credit costs surged to 24bps in 3Q13, due to an increase in the individualallowance allocated for a single customer s default in 3Q13. The single customer wasfrom the transport, communication and storage sector. While we are comfortable with

BIMBs underwriting standards, we opt to forecast credit costs on the conservativeside (35-40bps).

The group is deemed more prudent than theindustry in terms of loan loss provisioning

Low credit costs in FY11/12, but likely totrend up towards a more normalised ~40bpsmoving forward


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Asset quality: How BIMB stacks up against key Islamic players. Looking at theIslamic operations of the listed banks in our coverage, we opine that BIMBs grossNPL improvement in 2Q13 was among the best vis--vis a year ago. Although itsasset quality is deemed better than the industrys , we note that there is still room forimprovement. Maybank Islamic, Public Islamic and CIMB Islamic each have grossNPLs of


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Figure 60: Forecasts, assumptions and SOP valuation table

Target forecast FY12 FY13F FY14F FY15F

3-yearCAGR

(%) Comments

Financing income(MYRm) 1,723.4 2,066.9 2,408.7 2,705.9 16.2%

Financing income is expected to lag behind financinggrowth due to compressing yields from: i) a higherproportion of floating-rate financing and ii) competition.

Our forecast does not take into account a possibledeterioration in its high-margin product mix.

Financing expense(MYRm) (590.6) (813.0) (1,020.5) (1,142.1) 24.6%

While the company's CASA is high, we adopt aconservative approach given the high demand of high-cost deposits, as well as sukuk expenses. Blended COFprojection is 2.4%.

Net financing income(MYRm) 1,132.8 1,253.9 1,388.2 1,563.8 11.3%

Net financing income is expected to lag behind financinggrowth. We project compressing NIMs, but this is slightlyoffset by rising LDR assumptions.

Non financingincome (MYRm) 719.4 773.9 896.4 991.0 11.3%

NFI is largely supported by income from the takafulbusiness

PPOP (MYRm) 792.6 863.5 976.6 1,081.4 10.9%

Loan loss provision(MYRm) (76.9) (63.5) (114.4) (147.6) 24.3%

Loan loss provisions are expected to normalise from alow base. We are assuming very conservative LLC asthe bank is not immune to defaults from corporatebusiness of single customer, as seen in 3Q13

Net profit, after MI(MYRm) 252.3 296.9 560.8 621.9 35.1%

Surge in net profit attributable to the full recognition ofBank Islam's profit by CY14

EPS (sen) 23.6 27.8 29.2 32.4 11.1%EPS growth is expected to lag behind PPOP growth dueto conservative credit costs assumptions

Gross financing(MYRm) 19,948.1 24,262.7 28,388.3 33,153.7 18.5%

The group moderated its financing growth target to 20%(from 25%) amid tighter household lending regulations.Our forecast for FY14F/15F is 17%.

Deposits (MYRm) 32,378.0 36,761.7 41,747.5 47,362.4 13.5%

NIMs (%) 3.09% 2.81% 2.74% 2.74% 2.84% YTD. This is an annualised figureCOF (%) 1.91% 2.29% 2.44% 2.44% 2.17% YTD. Our forecast includes the s u k u k expenseCIR (%) 57.21% 57.42% 57.25% 57.67% 57.7% YTD.LLC (%) 142.63% 161.46% 141.60% 132.21% 159% YTD.

LDR (%) 51.63% 61.61% 66.00% 68.00%65% YTD. There is a clear signal that the company istaking efforts to leverage on its low LDR for growth.

NFI ratio (%) 38.84% 38.17% 39.24% 38.79% 40% (13% ex-STMB) YTD.GNPL/GL (%) 1.55% 1.35% 1.31% 1.19% Current gross NPL is 1.39%.NNPL/NL (%) 0.91% 0.60% 0.66% 0.65% Current net NPL is 0.79%.

Credit costs (bps) 33 20 35 40Our forecast is on a conservative end vsmanagements guidance of 30 -40bps

ROE (%) 13.10% 14.08% 11.82% 12.49% FY14F ROE is adjusted for the full dilution effectROA (%) 0.61% 0.63% 1.04% 1.01%

SOPEarnings,

(MYRm) P/E Stake (%)

Equity value (MYRm)

Bank Islam, FY14F earnings 526.0 13.5 100.0 7116.6STMB, FY14F earnings 142.9 14.0 61.0 1220.2

Company level, net cash 1098.7

Total 9435.5No of shares, full dilution of warrants 1920.19

Value/ share 4.90

Implied P/E 17.4

Implied P/BV 1.98

Source: RHB estimates


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50.0% dividend payout. BIMB has maintained a minimum 50.0% dividend payoutpolicy since FY11. At the current price, the dividend yield translates into about 3.0%vs Maybanks 4.0 -5.0% and the commercial banks average 2.9 -3.5%. Weunderstand that the group has no plans to change its dividend payout at the moment,pending the full acquisition of Bank Islam.

Regional Bank Valuations Figure 61: Regional bank s valuations

La st price FV Ma rke t ca pCompany name Bloomberg

ticker Local

currencyLocal

currencyLocal

currency 'mCY13 CY14 CY13 CY14 CY13 CY14 CY13 CY14 CY13 CY14 RHBRI

CallAs at 3 Jan 2014Thailand banks THB THBBA NGKOK B ANK BB L TB E quity 168. 5 190. 0 339,774. 0 13. 9 12. 9 20. 8 3. 1 1. 1 1.1 9. 4 9. 1 4.5 4.9 NEUTRA LBANK OF AYUDHYA BAY TB Equity 29.8 22.4 185,257.0 12.8 12.5 57.9 1.7 1.5 1.0 11.4 11.0 na na SELLKASIKORNBANK PCL KBANK TB Equity 151.0 163.0 373,348.6 22.9 20.5 34.7 2.6 1.7 1.6 9.5 9.3 3.3 3.6 NEUTRALKRUNG THAI BANK KTB TB Equity 15.6 15.8 230,604.0 19.1 17.0 38.5 3.3 1.1 1.0 6.8 6.5 4.8 7.2 SELLKIATNAKIN BANK KKP TB Equity 35.3 45.5 31,023.0 14.7 13.2 18.6 -16.5 0.8 1.1 6.9 8.4 na na NEUTRALSIAM COMMERCIAL BANK SCB TB Equity 132.5 145.0 487,001.2 23.6 20.1 11.1 2.2 1.8 1.7 9.6 9.4 3.9 3.9 N EUTRALTHANACHART BANK TCAP TB Equity 31.0 30.0 41,210.0 12.4 11.0 9.6 -19.8 0.9 0.8 7.8 9.7 na na SELL

TISCO BANK TISCO TB Equity 37.3 36.0 30,828.0 22.5 20.1 13.7 -12.5 1.4 1.2 7.0 8.1 na na SELLTMB BANK TMB TB Equity 1.9 1.7 89,669.2 9.3 8.2 -60.0 4.1 1.4 1.1 11.6 10.0 na na SELLThailand Average 16.8 15.1 16.1 -3.5 1.3 1.2 8.9 9.1 4.1 4.9

Indonesian Banks IDR IDRBANK BUKOPIN BBKP IJ Equity 630 620 4,940,194.6 16.9 17.4 8.5 18.2 0.9 0.8 5.6 4.7 5.4 6.4 NEUTRALBANK CENTRAL ASIA BBCA IJ Equity 9,500 10,300 234,779,798.4 23.7 23.7 15.3 19.3 3.8 3.2 17.3 14.5 1.4. 1.6 NEUTRALBANK DANAMON BDMN IJ Equity 3,750 3,600 36,182,028.7 13.5 13.1 0.9 6.1 1.2 1.1 8.9 8.4 3.4 3.6 NEUTRALBANK JABAR BANTEN BJBR IJ Equity 880 1,200 8,629,699.1 21.9 20.8 16.5 6.4 1.3 1.2 6.2 5.8 7.7 7.9 BUYBANK MANDIRI BMRI IJ Equi ty 7,800 10,200 183,166,666.7 21.0 20.1 10.0 11.6 2.1 1.8 1 0.7 9.6 2.8 3.1 BUYBANK NEGARA INDONESIA BBNI IJ Equity 3,850 4,800 73,662,193.0 18.4 17.7 19.1 9.2 1.5 1.3 8.8 8.0 3.4 3.7 BUYBANK RAKYAT INDONESIA BBRI IJ Equi ty 7,250 10,100 178,851,424.5 27.4 2 4.1 5.9 7.1 2.3 1.9 9.0 8.4 2.2 2.4 BUYBA NK TAB UNGAN INDONESIA BB TN IJ E quit y 890 1, 000 9, 189, 689.1 12. 6 12. 8 13. 4 16. 0 0. 8 0.7 6. 7 5. 9 3.0 3.4 NEUTRA LIndonesia Average 19.4 18.7 11.2 11.7 1.7 1.5 9.2 8.2 4.0 4.0

Singapore Banks SGD SGD

DBS GROUP HOLDINGS LTD DBS SP Equity 16.98 19.40 41,667.3 10.9 10.9 -7.5 6.5 1.2 1.1 11.5 10.8 3.5 3.5 BUYOVERSEA-CHINESE BANKING OCBC SP Equi ty 10.02 10.90 35,099.2 10.1 9.9 -10.5 3.8 1.3 1.2 12.9 12.4 3.4 3.4 NEUTRALUNITE D OVE RS EAS B ANK LTD UOB SP Equit y 20.90 24. 50 33, 447. 9 11. 0 10. 9 1. 7 6. 6 1. 2 1.1 11.5 10. 8 3.4 3.6 B UYSingapore Average 10.7 10.6 -5.4 5.6 1.2 1.1 12.0 11.4 3.4 3.5

Malaysian Banks MYR MYR AFFIN HOLDINGS AHB MK Equity 4.26 4.40 6,202.5 9.0 8.8 -0.5 5.6 0.9 0.8 10.2 9.6 2.9 3.0 NEUTRAL ALLIANCE FINANCIAL GROUP AFG MK Equity 4.80 5.15 7,369.0 13.3 13.5 3.2 8.2 1.8 1.6 13.6 12.6 3.7 4.0 NEUTRAL AMMB HOLDINGS AMM MK Equity 7.29 8.35 21,822.7 14.2 14.3 9.7 9.8 1.7 1.6 12.5 11.4 3.2 3.5 NEUTRALBIMB HOLDINGS (Dilut ed bas is) BIMB MK Equity 4. 38 4.90 6, 541.6 14. 1 11. 8 17. 7 10. 9 2. 1 1.7 15.7 15. 0 3.2 3.3 B UYCIMB GROUP HOLDINGS CIMB MK Equity 7. 51 9.50 58, 811. 6 15. 1 15. 1 4. 2 11. 4 1. 8 1.6 12.3 11. 1 3.2 3.6 B UYHONG LEONG BANK HLBK MK Equity 14.24 16.60 27,070.7 15.0 1 4.8 5.6 10.6 1.9 1.7 12.8 11.6 2.4 2.7 BUYMALAYAN BANKING MAY MK Equity 9.91 11.40 87,376.7 14.0 13.5 1 .7 4.2 1.8 1.7 13.6 13.1 5 .1 4.5 BUYPUBLIC BANK BERHAD PBK MK Equity 18.90 19.40 68,519.4 21.8 20.9 8.4 8.1 3.3 2.9 15.9 14.7 2.8 3.1 NEUTRALRHB CAPITAL^ RHBC MK Equity 7.97 NA 20,298.9 11.0 11.5 -10.7 12.7 1.1 1.2 11.3 10.2 2.8 3.2 NRMalaysia Average 14.2 13.8 4.4 9.1 1.8 1.7 13.1 12.1 3.3 3.4

^Not under coverage. Forecast based on Bloomberg estimates

ROE (%) P/BV (x) Core P/E (x) DividendEPS growth

Source: RHB estimates


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Figure 63: Quarterly financing profile

Economic Purpose 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q1Primary agriculture 178.4 174.5 149.2 124.5 193.2 212.2 223.2 205.8 166.6 169.3Mining and quarrying 0.0 0.0 48.2 42.0 49.2 5.8 5.3 8.2 13.9 6.9Manufacturing (and agro) 917.2 834.1 904.8 1088.1 1080.3 1192.4 1016.1 980.7 798.5 900.3Electricity, gas & water 14.0 14.8 7.2 8.0 3.8 78.3 175.7 234.0 261.8 324.9Wholesale, retail 578.8 535.5 558.8 416.0 520.4 543.2 673.2 683.1 749.9 835.0Construction 598.5 699.6 756.0 1157.2 1157.2 1661.2 1725.5 1680.6 1026.4 1728.8Real estate 294.5 334.8 385.3 350.2 392.2 442.4 572.8 575.9 656.0 558.0Transport, communication 289.5 225.4 233.8 208.5 206.3 198.4 208.9 212.9 247.5 241.9Finance, insurance 161.9 190.6 180.8 190.8 247.9 320.0 391.5 617.3 1443.3 763.2Education, health, social 84.5 92.5 122.2 124.8 207.3 213.5 254.0 278.9 289.2 327.3Household 10022.8 10484.5 11016.5 11559.6 12706.6 13666.3 14693.1 15431.9 16199.7 17214.9Others 90.5 142.5 202.6 25.2 9.4 6.5 8.6 5.3 5.4Gross loans & Other Receivables 13230.5 13728.5 14565.3 15294.9 16773.9 18540.2 19948.1 20914.6 21858.1 23070.4Corporate 24.2% 23.6% 24.4% 24.4% 24.2% 26.3% 26.3% 26.2% 25.9% 25.4%Household 75.8% 76.4% 75.6% 75.6% 75.8% 73.7% 73.7% 73.8% 74.1% 74.6%Total household loans 10,022.8 10,484.5 11,016.5 11,559.6 12,706.6 13,666.3 14,693.1 15,431.9 16,199.7 17,214.9Total business loans 3,207.7 3,244.0 3,548.8 3,735.3 4,067.3 4,873.9 5,255.0 5,482.7 5,658.4 5,855.5Household YoY Growth 17.2% 16.3% 18.2% 20.0% 26.8% 30.3% 33.4% 33.5% 27.5% 26.0%Business YoY Growth -7.3% -2.1% 19.8% 16.3% 26.8% 50.2% 48.1% 46.8% 39.1% 20.1%GL QoQ Growth 3.0% 3.8% 6.1% 5.0% 9.7% 10.5% 7.6% 4.8% 4.5% 5.5%Household QoQ Growth 4.1% 4.6% 5.1% 4.9% 9.9% 7.6% 7.5% 5.0% 5.0% 6.3%Business QoQ Growth -0.2% 1.1% 9.4% 5.3% 8.9% 19.8% 7.8% 4.3% 3.2% 3.5%GL YoY Growth 10.2% 11.3% 18.6% 19.1% 26.8% 35.0% 37.0% 36.7% 30.3% 24.4%Gross LDR (%) 56.2% 52.7% 51.6% 58.9% 58.7% 60.1% 61.6% 57.7% 63.0% 65.4%Gross LDR (%) 81.8% 81.9% 80.9% 80.2% 82.1% 82.0% 82.1% 81.6% 82.8% 83.9%Customer 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q1Domestic NBFI 22.8 29.7 25.8 32.4 25.2 36.8 57.6 210.2 225.0 229.5Domestic business enterprise 430.9 398.8 2683.7 2972.4 3203.5 3926.3 4327.4 4231.6 4327.6 4558.3Small medium industries 2295.5 2827.8 391.9 419.4 464.5 476.8 493.4 549.5 581.8 611.1Government statutory bodies 170.2 125.6 129.8 83.6 125.8 120.9 165.6 228.1 204.0 198.4Individuals 10014.3 10013.6 10989.0 11521.2 12737.4 13692.5 14679.6 15449.4 16307.8 17203.3Other domestic entities 42.1 41.3 73.2 54.8 5.8 5.5 5.6 4.9 4.7 4.6Foreign entities 254.8 291.8 271.8 210.9 211.5 281.4 219.0 240.9 207.2 272.8Gross loans & Other Receivables 13230.5 13728.5 14565.2 15294.9 16773.9 18540.2 19948.1 20914.6 21858.1 23078.0

Individual 75.7% 72.9% 75.4% 75.3% 75.9% 73.9% 73.6% 73.9% 74.6% 74.5%Small medium enterprise 17.3% 20.6% 2.7% 2.7% 2.8% 2.6% 2.5% 2.6% 2.7% 2.6%Corporate 7.0% 6.5% 21.9% 21.9% 21.3% 23.6% 23.9% 23.5% 22.7% 22.8%Contract 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q1Bai'Bithaman Ajil (defered payment sale) 6648.8 6996.0 7291.7 7561.5 7964.0 8313.3 8720.0 9079.8 9212.1 9193.8Ijarah (operating lease) 308.4 307.5 295.9 284.8 274.1 212.6 206.9 206.6 196.6 197.2Ijarah Muntahiah Bit-Tamleek (finance lease) 21.5 24.2 22.6 24.7 30.5 29.8 30.6 29.2 44.1 61.5Mudharabah (profit sharing) 6.0 6.0 6.0 6.0 6.0 6.0 0.0 0.0 0.0 0.0Murabahah (cost-plus) 1407.8 1256.3 1316.9 1380.7 1450.6 1598.4 1403.2 1227.3 884.8 1000.8

Al-Tawarruq (benevolent funding/qard) 3019.8 3356.2 3904.0 4342.4 5359.9 6311.0 7530.6 8449.9 9553.8 10752.6Bai Al-Inah 1528.4 1488.9 1435.6 1386.5 1364.4 1749.5 1729.7 1596.3 1635.3 1606.1Istisna' 265.3 261.6 245.3 247.4 248.3 245.3 246.6 245.4 247.0 179.5

Ar-Rahnu 24.7 31.7 47.4 60.9 75.9 74.2 80.6 80.0 84.3 86.5Gross loans & Other Receivables 13230.5 13728.5 14565.3 15294.9 16773.9 18540.2 19948.1 20914.6 21858.1 23078.0



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Appendix 2: Deposits Profile

Figure 64: Annual deposits breakdown

Type (MYRm) 2004 2005 2006 2007 2008 2009 2010 2011 2012MudharabahSaving Deposits 1,221.6 433.2 454.4 467.4 521.1 680.6 987.3 1,263.6 1,942.2General Investment Deposits 2,906.5 3,110.5 2,417.2 2,015.1 2,411.0 2,535.3 2,449.6 1,851.7 2,173.8Special Investment Deposits 3,692.0 4,823.8 3,784.7 4,129.1 3,720.7 6,090.3 7,793.3 8,352.3 12,749.3Negotiable Islamic Debt Securities (NIDC) 9.1 9.1 9.1 0.6 0.2 0.2 0.0 0.0 0.0Total Mudharabah 7,829.3 8,376.6 6,665.4 6,612.3 6,653.0 9,306.4 11,230.3 11,467.6 16,865.3

Non-MudharabahDemand Deposits 2,367.4 2,709.2 3,555.1 4,555.1 5,842.7 6,336.1 7,090.7 8,412.4

bimb holdings analysis

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