MIDF Research said the GEAR-Up programme can help BIMB build up its underperforming SME segment.
PETALING JAYA: Bank Islam Malaysia Bhd (BIMB) is in a good position to attract stronger earnings in the second half of the year, underpinned by several factors.
Analysts are generally bullish on the lender to rake in commendable earnings due to its ability to grow its small and medium enterprise (SME) loan book via the Finance Ministry’s (MoF) GEAR-Up initiative, specialised services offered by its branches, benign fixed deposit (FD) competition and the salary hike for civil servants.
MIDF Research said the GEAR-Up programme can help BIMB build up its underperforming SME segment.
The MoF is spearheading the programme aimed at synergising efforts across government-linked investment companies (GLICs) to catalyse growth in key economic sectors.
Six GLICs are involved in the initiative: Khazanah Nasional Bhd, the Employees Provident Fund, Retirement Fund (Inc), Permodalan Nasional Bhd, Lembaga Tabung Haji and the Armed Forces Fund Board.
These GLICs will collectively invest RM120bil in domestic direct investments over the next five years, on top of RM440bil in public market investments under its existing investment programmes.
The research house said this implies the potential availability for low-cost capital for micro-financing.
“While the quantum of such funding remains uncertain, BIMB can likely establish its relationship with micro-companies requiring funding.
“When these micro companies grow and transition into full-blown SMEs, BIMB can include them in its SME portfolio. To summarise, this will enhance BIMB’s ability to grow its SME loan book, which has been lacklustre relative to its peers, with potentially low-cost capital,” the research house said.
Hong Leong Investment Bank Research (HLIB Research) said it expects BIMB’s third-quarter (3Q24) net financing margin (NFM) to continue to broaden on the back of faster financing growth, benign FD competition and the move to lower its board FD rates in August.
“In our view, the potentially quicker credit growth would help to optimise FD rates and widen NFM as well. Management shared its corporate lending pipeline is robust and should trickle through in the second half of the year, while the retail segment is seen to regain steam on seasonally stronger demand.
“Separately, its non-cash charge is anticipated to be stable at current levels, given steady asset quality. In any case, we are generally reassured by the bank’s financing loss coverage of more than 100%, as this provides the buffer to pad any potential deterioration in asset quality,” the research house said.
