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Bank Islam Posts a PBZT Growth of 36.5 Percent in FY2011

Highlights for the full-year period under review as at 31 December 2011:


  • PBZT rose 36.5% YoY to RM470.1 million
  • Robust net financing growth of 19.2% or RM2.3 billion to RM14.1 billion
  • Customer deposits totaled RM28.3 billion of which CASA comprised RM12.3 billion, equivalent to a CASA-to-deposits ratio of 43.4%
  • Continuous improvement to asset quality
    • Amount of gross net impaired financing declined by 31.2% or RM172.4 million to RM379.8 million while gross impaired financing ratio dropped to 2.6% (end-December 2010: +4.5%)
    • Amount of net impaired financing declined by 134.8% or RM172.6 million to negative RM44.5 million while net impaired financing ratio dropped to negative 0.3% (end-December 2010: +1.1%)
  • Strong capital adequacy ratio at 16.3%

KUALA LUMPUR, Tuesday, 28 February 2012 – Bank Islam Malaysia Berhad (“Bank Islam” or “the Bank”) turned in another strong set of results for the financial year 2011 (FY2011), announcing a 36.5% jump in its profit before zakat and tax (“PBZT”) to hit RM470.1 million.

In a statement, Managing Director Dato’ Sri Zukri Samat remarked how organic growth strategy has helped Bank Islam pull off another year of respectable financial performance in particular through a solid financing growth; a well-diversified product variety; relentless improvement in asset quality; growing contribution from non-fund based income; steady growth in lower cost customer deposit on strong customer loyalty and intensified efforts to contain costs. He further added that the recent “Best Islamic Bank in Malaysia” award conferred by Islamic Financial News is testament to Bank Islam’s commitment to balancing stakeholders’ needs and expectations in particular its customers.

Mirroring the strong profitability performance, both Return on Equity (“ROE”) and Return on Assets (“ROA”) were enhanced – to 17.7% (end-December 2010: 16.5%) and 1.5% (end-December 2010: 1.2%) respectively. Maintaining a high ROA of at least 1.5% is not an easy task, which largely reflects the Bank’s on-going exercise of balance sheet reshaping for optimal returns, good diversification of product mix, continuous cost control initiatives and a better funding cost structure.

At 16.3% as at end-December 2011, Bank Islam’s Risk-Weighted Capital Ratio (RWCR) remained healthy (end-December 2010: 16.8%), far exceeding the minimum capital adequacy ratio requirement of 8% and the Islamic banking industry’s average of 14.1% as at end-December 2011.

Total income remained on a double-digit growth track in FY2011, rising by 10.6% to RM1.66 billion as the sharp 52.3% surge in non-fund based income on the back of hefty gains in fee-based income (+16.6%), investment income (+76.7%), foreign exchange related income (+287.8%) and other income (+450%), added strength to the 5.9% increase in fund-based income. Indeed, the incremental amount of RM78.7 million in non-fund based income almost matched the RM79.9 million increase in fund-based income in FY2011 thanks to rising contribution from corporate finance and advisory activities, treasury and other investment banking services, wealth management/unit trust products, mobile banking services and foreign exchange related business. Consequently, the ratio of non-fund based income to total income edged up further to 13.8% as at end-December 2011 from just 10.8% a year ago. “Developing and launching innovative products with fee-income generating capacity would be a viable strategy to consider to further boost the contribution of non-fund based income”, said Dato’ Sri Zukri.

Net financings expanded by RM2.3 billion, translating into a 19.2% growth, pushing the financing portfolio to RM14.14 billion as at end-December 2011 from RM11.86 billion a year ago. Robust growth in the financing portfolio did not derail the Bank’s continuous efforts to enhance its asset quality during the FY2011 as the amount of gross and net impaired financing continued to fall by 31.2% and 134.8% respectively from levels as at end-December 2010. As a result, the gross impaired financing ratio and net impaired financing ratio dropped to 2.6% (end-December 2010: +4.5%) and negative 0.3% (end-December 2010: +1.1%) respectively as at 31 December 2011. Total allowances for impairment of financings and investments amounted to RM209.7 million, a decline by 24.9% or RM69.5 million from a year ago.

Throughout FY2011, Bank Islam’s strategy of reshaping its balance sheet continued to manifest on its deposit structure given the focus on sourcing funds at lower costs. Customer deposits totaled RM28.3 billion as at end-December 2011 of which current and savings accounts (“CASA”) made up 43.4% as opposed to 39.7% as at end-December 2010. Faster growth in net financings (+19.2%) compared to customer deposits (+5.3%) led to the improvement in Bank Islam’s financings-to-deposits ratio to 51.5% as at end-December 2011 from 45.7% a year ago.

During the year under review, Bank Islam opened nine new branches, bringing the total number of branches to 122. Bank Islam is leveraging on its expanding branch network, together with other electronic delivery channels to cater to its more than 3.5 million customers. In FY2011, the Bank also successfully launched its multi-function debit card and recently clinched two awards from VISA International for the highest usage of electronic payment via debit card. Bank Islam has also been named as the “Most Trusted Brand” by the Readers’ Digest and the “Best Brand for Financial Services” under the Islamic banking category by the BrandLaureate Award.

Reiterating his full support of Bank Negara Malaysia’s Guidelines on Responsible Financing, Dato’ Sri Zukri said, “I strongly believe that these pre-emptive measures will go a long way in achieving sustainable and healthy growth trajectory for the banking industry and preventing any credit bubble due to an excessive build-up of household indebtedness.” Stricter retail lending conditions based on net income aim to promote prudent, responsible and transparent retail financing activities premised on affordability and capacity repayment in order to preserve the household sector’s resilience while ensuring access to credit.

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