KUALA LUMPUR, Wednesday, [1 September 2010] – Bank Islam Malaysia Berhad (Bank Islam) announced today a 34.3% or RM 79.9 million higher profit before zakat and tax (PBZT) of RM313.0 million for the 12 months to June 2010, compared to a year ago.
Managing Director Dato’ Sri Zukri Samat said in a statement the stronger performance was achieved on the back of strong growth in quality financing, continued improvement in asset quality and an increase in lower cost deposits.
The PBZT translated into a Return on Equity (ROE) of 16.2% compared with the industry average of 13.9%. This is despite the increase in equity from the Islamic Convertible Redeemable Non Cumulative Preference Shares (CRNCPS-i) during the year. The Return on Assets increased to 1.1% from 0.9% a year ago, arising from reshaping of the balance sheet with better product mix that maximises returns and lower the cost of deposits.
Reviewing the 12 month performance, Dato’ Sri Zukri said: “The Bank’s net financing grew by 16.8% or RM1.62 billion to RM11.3 billion.”
“Consumer financing contributed to 90% of the growth, driven by the launch of a series of innovative consumer products during the year, not only enable the Bank to meet changing and sophisticated consumer needs but also help the Bank to stay ahead of the competition,” he said.
Dato’ Sri Zukri said, despite the sharp growth in financing, non-performing financing (NPF) continued to trend downwards. The net NPF ratio (based on 3-month classification) declined to 3.24% compared to 6.74% as at June 2009. Total NPF declined 44% to RM371 million, compared with RM663 million a year ago. The sharply lower NPFs is due to the continuous enhancement of the Bank’s credit underwriting standards and better management of the asset portfolio
In terms of deposits, the Bank reported a 5.9% or RM1.5 billion increase in deposits to RM26.7 billion as at June 2010, with more than half of that growth coming from the current and savings deposits. The Bank’s current and savings deposits account for 37.1% of the Bank’s total deposits.
The launching of two new deposit products during the period contributed to the healthy deposit growth. These are the Ziyad, a Structured Deposit Investment product was launched in November 2009 while Waheed-i, a Wakalah based deposit product was launched in February 2010. Both these deposits have been well received by our customers.
With the good financial results and following the injection of RM540 million CRNCPS-i,a tier-1 capital, the Bank’s Risk Weighted Capital Ratio (RWCR) strengthened to 16.7% in June 2010 from 13.6% in the previous year.
Dato’ Sri Zukri said the Bank will continue to diversify its revenue streams, especially its fee base revenue. They will include the introduction of a new technology based solution to cater for the growing needs of generation X and Y in the last quarter of this year, and the further expansion into the Ar-Rahnu or Islamic pawnbroking services and collaboration on the customisation of Islamic Investment products.
He said: “Competition in the Malaysia financial services industry however is expected to stiffen following Bank Negara Malaysia’s issuance of new banking licenses and the forthcoming 2 mega Islamic banks, However, Bank Islam will continue to offer attractive Shariah-based financial solutions and innovate relentlessly to cater to the needs of people of all walks of life. This is the main pillar of the Sustainable Growth Plan (SGP), launched in June 2009 to achieve operational excellence and deliver sustainable profits.”
The SGP, a blueprint for Bank Islam’s growth into a premier Islamic financial institution comprises six pillars i.e. Business Innovation, Robust Risk Management, Building Capabilities and Capacities, Strenghtening Enabling Infrastructure, Franchise Development and Inorganic Growth/Corporate Expansion.
As part of its franchise development, Bank Islam has expanded its business by establishing new branches raising the total to 104 branches nationwide and 4 Currency Exchange outlets at strategic locations, he added.
In recognition for the products and services offered, Bank Islam was awarded the prestigious Platinum Award for the “Most Trusted Brand for Islamic Financial Services” in May 2009 by Readers Digest Trusted Brand Awards 2009. This was the result of the Bank’s dynamic corporate rebranding, branch remodelling and business transformation initiatives as well as the introduction of innovative products and services. The bank came out tops based on six qualitative criteria: trustworthiness and credibility, quality, value, understanding of customer needs, innovation and social responsibility.
Dato’ Sri Zukri said: “While the Bank makes further investment in people, technology and processes in the immediate future to realize its mission and strategic objectives, we will continue with efforts to reduce costs through synergies and centre of excellence.”