Bank Islam's 1Q net profit falls by a third on higher impairment allowance

Bank Islam group chief executive officer Mohd Muazzam Mohamed

KUALA LUMPUR: Bank Islam Malaysia Bhd’s net profit fell by a third to RM105.92 million in the first quarter (Q1) ended March 31, 2022, from RM158.71 million a year earlier mainly due to a higher net allowance for impairment on financing and advances.

However, revenue edged up 0.4 per cent to RM773.97 million from RM770.92 million in the corresponding period of last year.

"The performance translates into group earnings per share of 4.95 sen and annualised return on equity of 6.4 per cent after tax and zakat,” it said in a filing with Bursa Malaysia today.

The bank said net fund-based income rose by 3.8 per cent year-on-year (y-o-y) to RM477.78 million mainly driven by higher income from financing, while non-fund-based income decreased by 37.1 per cent to RM45.34 million due to lower net gain from the sale of financial assets at fair value and higher net loss on revaluation of financial assets at fair value.

"The group’s total assets grew y-o-y by 11.2 per cent to RM80.5 billion with its net assets per share at RM3.09.

"Gross financing grew by 6.7 per cent y-o-y to RM59.8 billion, while customer deposits and investment accounts stood at RM68 billion with a y-o-y increase by RM6.6 billion or 10.8 per cent,” it said.

Bank Islam said its total current and saving accounts and transactional investment accounts (CASATIA) composition are at a healthy level of 38.6 per cent of total customer deposits and investment accounts, while the gross impaired financing ratio was 1.02 per cent compared to 0.96 per cent at the end of last year.

The group’s total capital ratio remained strong at 19.5 per cent as at March 31, 2022, it added.

In a media statement, group chief executive officer Mohd Muazzam Mohamed said the group is committed to realising its LEAP25 aspirations and strategies as it leverages the expected economic recovery.

"We are currently in a new growth phase grounded by the environment, social and governance (ESG) principles to drive delivery and performance and had embarked on a journey of developing ESG Framework, incorporating climate and sustainable risk management in the credit assessment.

"Our LEAP25 aspiration is to become a prominent offeror of Shariah-ESG total financing solutions by end-2025,” he said,

On the digital banking proposition, he said the bank has taken a proactive effort in setting the right technology, people, and products to meet the needs of its target segments and hopes to introduce Bank Islam's digital banking proposition in the third quarter of this year.

Mohd Muazzam said the group foresees that a further overnight policy rate (OPR) hike of 25 basis points is likely this year, and any increase in OPR will affect favourably on the group’s profitability.

Although the reopening of regional economies led to a pickup in financing growth and reduced impairment charges, market weaknesses seen previously have mitigated these positive impacts, he said.

"However, the group remains cautious when looking at the surrounding economic volatility, including disrupted trade growth, soaring commodity prices, and the evolving geopolitical situation.

"We will continuously pursue traction on our line of businesses and channels towards 2025 through our five business drivers, namely wealth management, social finance, digital bank, enterprises, and wholesale banking,” he added. - Bernama

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Bank Islam , OPR , LEAP 25 Strategy , Banking


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