PETALING JAYA: Bank Islam Malaysia Bhd
’s net financing margin ( M) is likely to ease in the coming months.
Hong Leong Investment Bank (HLIB) Research said it expects the bank’s third quarter of financial year 2025 (3Q25) M to ease in the upcoming quarter due to the impact of the July overnight policy rate cut.
“However, management has scope to cushion the contraction through optimising its relatively low financing-to-deposit ratio by accelerating its financing growth.
The research house said, however, this could entail higher capital consumption, and the bank may need to reinstate its dividend reinvestment plan.
That said, HLIB Research said gradual fixed deposit repricing will still help to restore M within six to nine months.
Separately, it added that net credit cost (NCC) is seen to remain stable quarter-on-quarter at current levels, given steady asset quality.
Moreover, BIMB Research noted that it has already preemptively built up management overlays in 1Q25, reducing the likelihood of large provisions in the near term.
HLIB Research is retaining its “hold” call on the Islamic banking group with a Gordon growth model (GGM) target price of RM2.40.
Meanwhile, MBSB Research said it is revising Bank Islam’s financial year 2025 (FY25), FY26 and FY27 core net profit by minus 10%, minus 4%, and minus 3% respectively.
This is to reflect the higher NCC guidance given by management, as well as higher operating expenditure growth.
The research house said key downside risks include weak loan growth, steep net interest margin compression and higher-than-expected NCC, adding that it is maintaining its “neutral” call with a revised GGM target price of RM 2.31.
Bank Islam recorded a year-on-year decline of 5.9% in net profit to RM253mil for the six months ended June 30, 2025 (1H25). The group said the slight decline in 1H25 profitability was primarily due to higher total overheads, net allowances for impairment and finance costs.
Despite the uptick in new impaired financing, the group maintained strong asset quality, with a gross impaired financing ratio of 1.05% as at end-June 2025, well below the industry average of 1.42%.
Total net income rose 9.9% to RM1.4bil, spurred by an increase in non-fund-based income and strong growth in financing.
Total capital ratio remained robust at 20.3% as of June 30, demonstrating a strong capital position and continued financial resilience, Bank Islam said.
For the second quarter ended June 30, 2025, net profit came in at RM126.68mil, down from RM138.1mil a year ago.
