• Maintain NEUTRAL and MYR3.30 TP, 13% upside. 1Q22 results missed our and Street expectations at 19% and 18%, due to weakness in trading income. While credit cost remains within the guidance of <30bps, ROE of 6.4% fell short of the 10% target, and we observe a persistent weakness in asset quality. We keep our forecast unchanged at this juncture, pending the analyst briefing later today.

• Missed expectations. Bank Islam reported 1Q22 PATAMI of MYR105.9m (+33% QoQ, -33% YoY). We deem this below expectations, at 19% and 18% of our and Street estimates – on weaker-than-expected non-financing income. The sequential improvements were driven by growth in PIOP (+8.8%) and a lower allowance for impairment of financing (-60% QoQ). Annualised ROE of 6.4% fell short of its 10% target for FY22F (FY21: 8.4%).

• Results review. 1Q22 PIOP improved 8.8% QoQ (-9.5% YoY), mainly due to the normalisation of personnel cost (-21% QoQ) and marketing related expenses (-37% QoQ). Net financing income remained flat QoQ (+3% YoY), while non-financing income declined 49% QoQ (-37% YoY) on trading losses of MYR21.7m vs 4Q21’s MYR24.3m. The latter was due to lower net gain from the sale of financial assets at fair value through other comprehensive income or FVOCI and higher net loss on revaluation of financial assets at fair value through profit or loss or FVTPL. This resulted in positive JAWS, which led to a 6.3-ppts improvement in CIR to 58.9%. 1Q22 also saw lower QoQ allowance for impairments, but the effective tax rate increased to 33.5% due to the recognition of Cukai Makmur. Financing growth grew 1% QoQ while deposit declined 3.9% – likely impacted by the concurrent festive period in the quarter. CASATIA ratio decline 1ppt to 38.6%.

• Asset quality deteriorated. Gross impaired financing (GIF) increased 7.7% QoQ (+53.3% YoY) to MYR612m, with GIF ratio following suit, up 6bps to 1.02%. Financing loss coverage or FLC continues to weaken to 180.6%, down 6.6bps in 1Q22.

• We keep our TP unchanged at this juncture, pending the analyst briefing tomorrow. Our key assumptions are kept unchanged at this juncture. Based on our proprietary in-house methodology, we derive an ESG score of 3.0 out of 4.0 for BIMB. As this score is in line with our country median, we apply a 0% premium/discount to our intrinsic value.

Source: RHB Research - 1 Jun 2022