Bank Islam’s quarter one 2023 earnings were below Maybank Investment Bank Bhd (Maybank IB) expectations and more so against consensus.
Maybank IB in a recent report lowered financial year 2023/2024 estimated earnings by 4%/6% respectively and lowered their trading price to RM2.05 from RM2.20, on an unchanged financial year 2023 estimated price-book value of 0.7x.
Bank Islam’s quarter one 2023 core net profit of RM118 million was below expectations at 23% of Maybank IB’s full-year forecast and 20% of consensus, with the variance stemming mainly from higher-than-expected expenses and credit cost.
Positively, financing growth was a robust 11% year-on-year while non fund-based income surged 132% year-on-year. However, net interest margin contracted 16 basis points quarter-on-quarter while credit cost jumped to 38 basis points in quarter one 2023 from 22 basis points in quarter four 2022.
Against earlier targets, management maintains its financing growth target of 7-8% for financial year 2023, but net interest margins are estimated to compress to about 2.15% from an earlier guidance of 2.20%.
Operating expenses are expected to expand 8-9% with a cost/income ratio of 58% versus an earlier guidance of 59%. Credit cost meanwhile is expected to trend at 35-40 basis points versus earlier expectations of 40-50 basis points.
“We lowered our net interest margin forecast to 2.13% for financial year 2023 from 2.18% previously, but maintain our credit cost estimate of 35 basis points for the year,” said Maybank IB.
