Wednesday, September 2, 2009

Bank Islam to start 3-yr sustainable growth plan

Bank Islam Malaysia Bhd marked the conclusion of its Turnaround Plan on an upbeat note, posting a profit before zakat and tax (PBZT) of RM233.1 million for the financial year (FY) ended June 30, 2009.
The bank also achieved all the performance targets and implemented all five pillars of its threeyear programme as scheduled. Managing director Datuk Zukri Samat said following the successful completion of the Turnaround Plan, marked by healthy profits over three consecutive FYs, the bank will now embark on a three-year Sustainable Growth Plan (SGP).
"We will focus on six pillars to drive our growth under the SGP. Heading the list is business innovation; which will be followed by robust risk management; the strengthening of our enabling infrastructure; building capability and capacity; franchise development and last but not least, inorganic growth and corporate expansion," he said in a statement yesterday.
The SGP will build on the achievements of the Turnaround Plan, especially in the last financial year, and is aligned with Bank Islam's pursuit to be a global leader in Islamic banking.
In FY09, despite the difficult economic conditions associated with the global recession triggered by a global financial crisis, the bank achieved a PBZT of RM233.1 million compared with the record PBZT of RM308.3 million in FY08.
The 24% lower profit is due mainly to the high base effect given an exceptionally high oneoff financing recovery amount of RM127.95 million registered in fiscal 2008. Zukri said the FY09 financial performance was particularly encouraging as operating profit surged 28% to RM359.2 million from RM280.2 million a year ago on the back of net financing growth of 6.6% to RM9.7 billion and deposit growth of 21.4% to RM25.2 billion.
Total income during the year rose 10% to RM1.27 billion from RM1.15 billion, with the nonfund based income accounting for 11% of total income, a significant increase in contribution from 8.1% in FY06.
Bank Islam's capitalisation and asset quality indicators remained solid in FY09. To date, Bank Islam has received RM324 million from BIMB Holdings Bhd and Lembaga Tabung Haji under the first tranche of the fresh capital injection exercise. Post-overall capital injection, the RWCR is projected to be strengthened further to 18%.
The bank's asset quality also improved considerably with the continuous decline in its net nonperforming financing ratio to 4.9% (FY08: 7.8%) and the rise in its financing loss coverage ratio to 80.8% (FY08: 75.8%). In line with the lower PBZT, the bank's profitability indicators such as the Return on Equity (ROE) and Return on Assets (ROA) declined in FY09 to 16.5% (FY 08: 26.5%) and 0.9% (FY08: 1.5%) respectively.
However, the cost-to-income ratio dropped slightly to 56.7% (FY08: 60.8%) notwithstanding the bank's continued investment for the purpose of branch remodeling and network expansion, enhancements to its IT infrastructure and talent development.
All business divisions performed well, with the Consumer Banking division remaining the largest contributor, representing 66% or RM7.1 million of the bank's total financing portfolio.
The non-fund based income also posted a huge jump of 46.7% to RM131 million with contributions mainly from the Corporate Investment Banking, Treasury and Consumer Banking divisions.
Zukri said in the current FY, the bank plans to leverage on the gradually improving economic conditions by diversifying its revenue lines particularly in the non-fund based income generating businesses of corporate investment banking, treasury operations and consumer banking.

(This story appeared in The Malaysian Reserve on Sept 03, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

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