We maintain our BUY recommendation on Bank Islam (BI) with a lower fair value (FV) of RM3.80/share from RM3.90/share. Our FV is based on an FY23F ROE of 11% leading to P/BV of 1.1x and reflects a neutral 3-star ESG rating.
We trim our FY22F earnings by 3% after penciling in a lower estimate for non-fund based income. Underlying earnings in 1QFY22 were slightly below expectation, accounting for 18% of our forecast while within consensus estimate, making up 20% of street’s. The variance to our estimate was due to lowerthan-expected non-fund based income.
The group reported a lower 1QFY22 core net profit of RM116mil (-27% YoY) after adjusting for the additional taxes of Cukai Makmur (RM10.5mil). The weaker earnings were due to lower non-fund based income and higher provisions for potential credit losses. The decline in non-fund based income was attributed to lower gains from sale of FVOCI assets and higher net loss on revaluation of FVTPL securities.
BI’s 4QFY21 gross financing accelerated to 6.7% YoY vs. 6.5% YoY, outpacing the industry’s loan expansion of 4.6% YoY.
For consumer loans, house and personal financing remained key contributors. House financing grew 9.7% YoY while personal financing expanded by 10% YoY. Meanwhile, growth in vehicle financing remained subdued and outstanding credit card receivables grew modestly.
CASATIA (current account, saving account and transactional investment account) ratio slipped to 38.6% in 1QFY22 vs. 39.6% in 4QFY21.
The group recorded an unwinding of mod loss, which positively impacted its 1QFY21 net income margin (NIM) by 6bps. Excluding mod loss, underlying NIM declined 17bps to 2.3% in 1QFY22.
The group’s gross impaired loan balances climbed by 7.6% QoQ to RM612mil in 1QFY22 due to higher impairment of household sector loans. As a result, BI’s gross impaired financing (GIF) ratio rose to 1% in 1QFY22 from 0.96% in 4QFY21. 1QFY22 credit cost stood at 29bps, within management’s FY22guidance of 29–31bps.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....