We maintain HOLD on Bank Islam (BI) with an unchanged fair value (FV) ofRM2.20/share. Our FV is based on FY24F ROE of 7.9%, leading to a P/BV of 0.7x. No change to our neutral 3-star ESG rating.
We made no changes to our earnings forecast as BI’s earnings of RM395mil were within expectations, accounting for 76.4% of our full year forecast and 77% of consensus estimate.
9M23 core net earnings of RM395mill declined 4.2% YoY, attributed to higher overhead expenses (OPEX) and provisions despite total income increasing on the back of stronger fund and non-fund-based income.
On QoQ basis, 3Q23 underlying net profit of RM141mil improved modestly by 3.2%. This was contributed by higher fund-based income and lower financing impairment allowance, partially offset by weaker non-fund-based income due to declines in gains from sale of FVOCI and FVTPL securities. NIM improved 6bps to 2.17% in 3Q23 from 2.11% in 2Q23.
For 9M23, net fund-based income rose marginally by 0.8% YoY, driven by financing growth and improving NIM. Meanwhile, non-fund-based income climbed 95.6% YoY, underpinned by higher net gains on fx transactions, gains from sale of FVOCI securities and positive mark-to-market revaluation on financial assets at FVTPL.
9M23 OPEX grew 11% YoY, largely contributed by higher personnel cost, promotion, establishment and general expenses.
The group recorded a higher CI ratio of 59.7% in 9M23 vs. 58.8% in 9M22 with growth in OPEX outpacing net income.
BI’s gross financing moderated to 8.4% YoY in 3Q23 vs. 9.3% YoY in 2Q23 but still outpaced the industry’s 4.3% YoY. It was within management’s guidance of a 7%-8% growth for FY23F.
In the consumer financing segment, house financing expanded by 6% YoY while personal financing grew 3.3% YoY.
CASATIA ratio slipped to 38.5% in 3Q23 vs. 39.1% in 2Q23.
The group’s gross impaired financing balances decreased by 4% QoQ, contributed by higher recoveries and write-offs. Additionally, it was due to lower new impaired financing formation.
BI’s gross impaired financing (GIF) ratio declined to 0.97% in 3Q23 from 1.03% in 2Q23 with no significant increase in impairments from any sectors.
9M23 credit cost of 33bps (9M22: 22bps) was within management’s guidance of 30bps-40bps for FY23F.
A single-tier interim dividend of 12.59 sen/share (payout: 71.5% based on 9M23 EPS) has been declared.
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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....