PETALING JAYA: Bank Islam Malaysia Bhd, which is the only listed Islamic bank in the country, is growing and well positioned to meet the challenges of the banking sector.
With an estimated market capitalization of RM6.3 billion, the bank is embarking on a five-year strategic roadmap (LEAP25) to strengthen its technology, redefine growth and work in new ways to meet the unprecedented challenges posed by the Covid-19 pandemic. .
Despite certain risk factors, it should remain resilient, thanks to the quality of its assets, high levels of provisions and a comfortable capital position.
“This does not detract from the fact that it continues to have a bancassurance agreement with its sister company, Syarikat Takaful Malaysia Keluarga Bhd, which will provide him with a stable source of fee income.
“Bank Islam offers investors exposure to the fourth Islamic bank in the country, in terms of asset size and the only one that is directly listed on Bursa Malaysia.
“It is indeed a retail bank, with consumer finance accounting for 76% of its total finance portfolio.
“Loans mainly to civil servants and employees of government-related enterprises (GLC) on a payroll deduction basis, Bank Islam’s asset quality is very stable, with its gross impaired loan ratio (GIL) declining further to 0. , 72% at the end of June 2021. against 0.86% at the end of September 2019.
“Its coverage of funding losses, meanwhile, went from 179% to 235% over the same period.
“Other positives include a current account savings account (CASA) ratio of 38.6% (vs. 31.7% for industry) and a comfortable Tier-1 (CET1) common equity ratio of 13.8%, ”added the research house.
Bank Islam recently became the first fully-fledged Islamic financial institution to be listed on the main market of Bursa Malaysia.
The pioneer syariah-compliant bank took over listing status from BHB.
The listing marked the completion of the restructuring exercise of the BHB Group, which involves a private placement exercise, a plan of arrangement to settle the outstanding warrants and the internal reorganization of the subsidiaries.
The internal business realignment measures also included a capital distribution and repayment exercise involving the distribution of all of BHB’s stakes in Bank Islam and Syarikat Takaful to BHB shareholders, and finally, the transfer of listing status from BHB in the main market at Bank Islam.
Maybank IB recommends a call option on Bank Islam with a target price of RM3.80.
However, he said there were several risk factors to his earnings estimates, price target and rating for the bank.
“Any slowdown in the domestic economy will have a negative impact on the bank’s profits, as will an acceleration in competition on deposit rates.
“In the meantime, a deterioration in asset quality, especially with regard to its exposure to the bottom 40% segment (B40), may result in higher than expected provision levels,” he noted.