CGS-CIMB EXPECTS BIMB'S CORE NET RECOVERY TO BEGIN IN FY22F

KUALA LUMPUR, Nov 17 -- CGS-CIMB Securities Sdn Bhd expects a recovery in Bank Islam Malaysia Bhd’s (BIMB) core net profit growth of 2.5 per cent in the financial year (FY) 2022 forecast and 30.5 per cent in FY23F.

“This is primarily driven by a drop in loan loss provisioning of -41.7 per cent in FY22F and -23.1 per cent in FY23F, and between 6.0 and 8.0 per cent rise in net financing income,” the research firm said in a note today.

CGS-CIMB has reflected Cukai Makmur, a one-off special tax, and 25 basis point (bp) overnight policy rate (OPR) hike in mid-2022F for its earnings forecasts for BIMB.

It said BIMB would be the biggest beneficiary of OPR hikes, as its FY23F floating-rate loan ratio of 91.3 per cent is the highest in the sector.

“We estimate that every 25bp hike in OPR would raise BIMB’s FY23F net profit by 7.1 per cent -- the highest in the sector,” it said.

Going forward, CGS-CIMB expects household loans to remain a key driver for BIMB’s overall loan growth as the bank would continue to leverage its strong franchise for lending to the staff of government and government-linked companies, as well as professionals.

It estimates a strong three-year compound annual growth rate (CAGR) of 8.5 per cent for BIMB’s household loans from FY20 to FY23F, though this would be slower compared to the five-year CAGR of 10.1 per cent from FY15 to FY20.

“We also see strong growth potential in its small and medium enterprise (SME) financing, as it only accounted for 3.2 per cent of Bank Islam’s total financing in FY20.

“We expect the proportion of Bank Islam’s SME financing to increase from 3.2 per cent in FY20 to 3.5 per cent in FY23F,” it added.

CGS-CIMB has placed its ‘add’ recommendation on BIMB with a target price of RM3.46 per share.

-- BERNAMA