Investment Highlights

• We maintain HOLD on Bank Islam (BI) with an unchanged fa value (FV) of RM2.50/share based on FY24F ROE of 8.3% leading to a P/BV of 0.8x and a neutral 3-star ESG rating.

• No changes to our net profit forecast as 1Q24 earnings o RM129mill were within expectations, accounting for 21.3% o our and 21.6% of consensus estimates.

• Net profit in 1Q24 rose by 9.4% YoY, attributed to higher ne income and lower allowances for financing losses. Net fund based income rose by 5.4% YoY from financing growth an higher NIM. However, this was partially offset by lower non fund-based income, dragged by a decline in investmen income.

• On QoQ basis, 1Q24 net profit slipped 18.4% from weaker non fund-based income as a result of a decline in fee commissions, gains from fx and securities. NIM was stable a 2.14% in 1Q24 vs. 2.13% in 4Q23.

• 1Q24 OPEX increased by 4.1% YoY to RM371mil, contribute by increase in personnel cost and establishment expense (mainly IT spend).

• The group recorded a positive JAW of 1.3% YoY with growth net income (+5.4% YoY) outpacing OPEX. CI ratio remai elevated at 63% in 1Q24 above the industry’s 48.7% due ongoing investments to enhance technology capabilitie improve operating efficiency and organisational agility.

• BI’s gross financing grew 2.4% YoY, below the industry’s 6% YoY and management’s guidance of a 7%-8% growth for FY2 as the group continues to manage its funding cost.

• In the consumer financing segment, house financing growt moderated to 3.8% YoY while personal financing continued t grow tepidly at 2% YoY.

• CASATIA ratio was marginally higher at 40.2% in 1Q24 v 39.9% in 4Q23.

• The group’s gross impaired financing balances decreased b 29.3% YoY. This was contributed by lower impaired financin of mining and household sectors.

• BI’s gross impaired financing (GIF) ratio climbed slightly t 0.95% in 1Q24 from 0.92% in 4Q23 but remained well below th industry’s 1.62%.

• 1Q24 credit cost of 25bps (1Q23: 37bps) was in line wit management’s guidance of <30bps for FY24.

Source: AmInvest Research - 23 May 2024