KUCHING: Bank Islam Malaysia Bhd (Bank Islam), of which 51 per cent is held by BIMB Holdings Bhd (BIMB), expects 2012 to be challenging with moderating loan growth and weaker net interest margin (NIM) as sector competition grows stiffer moving forward.
The bank also expected costs to inch up due to the renewal of the union’s (BIMB) collective agreement which could raise staff costs. In addition, it planned on continuous branch expansion, with 12 new branches to be opened this year.
HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) analyst Hon Seow Mee stated, “Loan growth will continue to be led by consumer (78 per cent currently), but it is working towards a 70:30 mix of consumer and commercial and corporate over the next three years, and improving its portfolio mix by raising share of secured financing to 50 per cent from 45 per cent.
“Bank Islam assumed BIMB’s listing status could be positive as this would allow investors to have direct exposure to Bank Islam. Currently, only 51 per cent of Bank Islam’s earnings are consolidated into BIMB.
“There are talks that Bank Islam is seeking to buy an Indonesian bank, which could allow it to penetrate new markets. There are no details yet, but pricing and the resulting synergies would be crucial,” she opined.
Bank Islam was the main contributor to BIMB’s earnings for FY11 (about 82 per cent of RM568 million pretax profit), leading to a Groupnet profit of RM204 million.
Meanwhile, Syarikat Takaful Malaysia Bhd’s (Takaful Malaysia) contribution was about 17 per cent. BIMB is the majority shareholder of Takaful Malaysia with a 65.22 per cent stake in the latter.
Its other equity shares included Dubai Group LLC (30.5 per cent) and Lembaga Tabung Haji (18.5 per cent).
Hon emphasised that BIMB’s asset quality remained stable while gross non-performing loan (NPL) ratio, at 2.6 per cent in financial year 2011 (FY11), should continue to improve.
She raised the earnings forecast for FY12 by seven per cent on lower provisions, and lowered gross NPL ratio to 2.5 per cent versus four per cent previously.
She also raised dividend payout to 50 per cent (from 20 per cent) following BIMB’s adoption of a 50 per cent minimum payout policy. BIMB’s share price had gained 15 per cent year-to-date.
“We are maintaining loan growth assumption at 10 per cent in the FY12 forecast, following strong growth in FY11 (up 19 per cent),” she stated while maintaining the target price at RM2.20 per share (based on the Gordon Growth Model), assuming 12 per cent return on equity, four per cent growth and 10.3 per cent cost of equity.