We maintain our BUY recommendation on Bank Islam (BI) with unchanged fair value of RM3.80/share based on FY22 ROE of 11.5%, pegging the stock to P/BV of 1.1x.
The group reported a lower net profit of RM102mil (-47.7% QoQ) in 3Q21. The softer in earnings was contributed by lower net income and higher operating expenses.
9M21 core earnings grew by 19.7% YoY to RM482mil after stripping out mod loss net of tax of RM27mil. The improved earnings were contributed largely by lower provisions.
Cumulative earnings were within expectations, accounting for 69.4% and 73.9% of our and consensus estimates.
BI’s gross financing moderated further to 3.9% YoY in 3Q21 vs. 6.4% YoY in the preceding quarter. Nevertheless, it remained ahead of the industry’s loan expansion of 2.9% YoY.
For consumer loans, house and personal financing remained key contributors. House financing grew 8.3% YoY while personal financing expanded by 3.7% YoY. Meanwhile, growth in vehicle financing and outstanding credit card receivables contracted YoY.
CASA and transactional investment account (CASATIA) expanded by 14.3% YoY while term deposits grew 6.4% YoY. CASATIA mix remained stable at 39.0%.
3Q21 net income margin (NIM) slipped 35bps to 2.11%, contributed by mod loss from Pemulih. Excluding the mod loss, underlying NIM for 3Q21 would be higher at 2.36%, a smaller decline of 5bps QoQ.
9M21 underlying net income margin (NIM) stood at 2.35% (excluding mod loss: 2.42%). This compared to 2.20% for 9M20 (excluding mod loss: 2.38%). NIM was within management’s guidance of 2.20–2.40% for FY21.
The group’s gross impaired loan balances declined by 5.1% QoQ or RM20.6mil to RM387mil in 3Q21. Stable asset quality with improvement in BI’s gross impaired financing (GIF) ratio to 0.68% in 3Q21 vs. 0.72% in 2Q21.
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....