Analysts believe that Bank Islam’s focus on Deposit Drive, Defensive Strategy and Digitalisation was the right move at current juncture as it would stabilise margins and ease any compression. — Reuters photo
KUCHING: analysts have reinforced their optimism on BIMB’s prospects, following a recent meeting with BIMB Holdings Bhd’s (BIMB) chief financial officer (CFO) Malkit Singh to review the investment case for the group. The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) reiterated its optimism on the prospect of BIMB, on the back of the group’s healthy asset quality and the robustness of its operations.
“In our opinion, its conservatism may slightly limit its earnings potential, but it had also restricted any possible downside risk,” MIDF Research said.
“We also believe that the group should present an attractive investment case for investors looking to have exposure in the financial sector but has syariah compliance is a criterion.”
According to MIDF Research, BIMB appears to be in transition at the moment with the departure of the group’s chief executive officer (CEO) recently.
While this may lead to some challenges, the research arm believed that the group has a firm strategic plan in which to face the current uncertain time.
The research arm also believed that the headwinds will only be temporary.
“In addition, we believe that the group has a strong foundation in which to sustain its earnings potential.”
On BIMB’s subsidiary Bank Islam, MIDF Research noted that based on its previous discussion, the strategic focus are Deposit Drive, Defensive Strategy and Digitalisation.
“Management stated that it will focus on current and savings accounts (CASA) such as salary accounts, cash management and Mudarabah current account.
“Also, the group will focus on finding the right funding mix such as Cagamas and medium term note (MTN) issuance.
“As for the Defensive Strategy, the group will be cautious with its assets growth.”
Together with the Deposit Drive, MIDF Research believed this was the right move at current juncture.
The research arm opined that this would stabilise margins and ease any compression.
“In our opinion, the group will derive tangible benefit should it decide to change its group structure, whereby its listing status is taken over by its banking subsidiary.
“Amongst the benefits are the reduction in cost and better capital adequacy.”
MIDF Research also believed that shareholders will gain directly from participating in the performance at the bank level.
However, the research arm did not discount that the current structure also has its advantages, such as ring-fencing Bank Islam from any systemic risk of the insurance industry or country risk should it decide to expand overseas.