Investment Highlights

• We maintain HOLD on Bank Islam (BI) with an unchanged fa value (FV) of RM2.20/share. Our FV is based on FY24F ROE o 7.6%, leading to a P/BV of 0.7x. No change to our neutral 3-sta ESG rating.

• Our earnings estimate for FY24F/25F have been tweaked b +1.9%/-3.6% after adjustments to our net income margin an cost to income (CI) ratio assumptions.

• 12M23 earnings of RM553mill was slightly above our forecas 7% ahead of our estimate. Meanwhile, it was within consensu project at 5% above street numbers. The variance to ou estimate was due to a lower-than-expected operatin expenses (OPEX) and provisions.

• Net profit in 12M23 rose by 12.5% YoY, attributed to net incom growth of 7.2%, partially offset by higher provisions an OPEX. The improvement in net income was contributed by a increase in net fund-based income as a result of stronge investment income and fx gains.

• On QoQ basis, 4Q23 net profit of RM158mil rose by 12.6% supported by an increase in non-fund-based income from higher fees, commission, fx gains, revaluation gains o financial assets at FVTPL and lower provisions.

• 12M23 OPEX grew 9.3% YoY to RM1.43bil, largely contribute by increase in personnel cost, promotion, establishment an general expenses.

• The group recorded a higher CI ratio of 60.9% in 12M23 v 59.8% in 12M22 with growth in OPEX outpacing net income.

• BI’s gross financing moderated to 3% YoY in 4Q23 compare to 8.4% YoY in 3Q23, below the industry’s 5.3% as well a management’s guidance of a 7%-8% growth for FY23.

• In the consumer financing segment, house financing growt eased to 4.6% YoY while personal financing grew slower a 2.3% YoY.

• CASATIA ratio increased slightly to 39.9% in 4Q23 vs. 38.5% in 3Q23.

• The group’s gross impaired financing balances decreased b 25.7% QoQ, contributed by higher recoveries an reclassification from impaired to performing loans.

• BI’s gross impaired financing (GIF) ratio slid to 0.92% in 4Q2 from 0.97% in 3Q23.

• 12M23 credit cost of 26bps (12M22: 21bps) was lower tha management’s guidance of 30bps-40bps for FY23.

• An all-cash 2nd interim dividend of 4.

Source: AmInvest Research - 29 Feb 2024