PETALING JAYA: Analysts generally expect Bank Islam Malaysia Bhd
’s (BIMB) profitability to continue being weighed down by a high cost-to-income ratio (CIR), while near-term net financing margin ( M) recovery remains capped by intense industry pricing competition.
The Islamic banking group recently posted an underwhelming first quarter of financial year 2026 (1Q26) core earnings of RM115mil, down 34.3% quarter-on-quarter and falling 8.9% year-on-year, primarily driven by higher-than-expected provisioning and finance costs.
In a note to its clients, Hong Leong Investment Bank (HLIB) Research said looking ahead, the growth trajectory for Islamic financing warrants closer monitoring.
The research house pointed out that the competitive landscape across both conventional and Islamic banking has intensified, exacerbated by recent structural shifts in industry repayment rules.
“Consequently, M recovery is likely to be delayed, as BIMB will need to maintain competitive pricing to defend its market share and drive financing book expansion,” it noted.
Operationally, BIMB’s CIR remains the primary culprit eroding profitability margins.
While structural headwinds persist, HLIB Research said strategic clarity from BIMB’s new management on execution paths to ease these margin pressures is well in the pipeline. Hence, greater granularity is expected to emerge, it added.
Reassuringly, the group’s credit profile also offers a silver lining.
According to HLIB Research, BIMB maintains a highly defensive asset quality position, with its gross impaired financing ratio sitting comfortably below the industry average, providing a resilient buffer against macroeconomic vulnerabilities.
That said, investors should continue to monitor this aspect closely, considering that the potential small and medium enterprise headwinds may trigger a rise in provisioning.
Following the results shortfall, HLIB Research has lowered the group’s financial year 2026 (FY26) and FY27 earnings forecasts by 19% and 20.3%, respectively.
The research house maintained a “hold” call on the stock with a lower target price (TP) of RM2.20.
“We view the risk-reward profile as balanced, with upside largely priced in.
“A consistent and proven track record in delivering its growth strategy will be key to restoring investor confidence.”
Meanwhile, MBSB Research said in a report that it has kept a “neutral” call on BIMB with an unchanged TP of RM2.32.
It noted that the group’s cost inflation is among the highest in the industry.
This should persist, given BIMB’s rapid expansion and future transformation plans.
That said, BIMB is poised to gain loan market share, even if high loan growth targets are not fully achieved.
“The group will aim for a more non-retail-heavy mix, and a recent recovery supports this,” MBSB Research added.
