Covid-19 drives Bank Islam’s growth

Bank Islam is embarking on a 5-year roadmap to deliver the promise of tech, redefine growth and work in new ways

by AZREEN HANI & NUR HANANI AZMAN / Pic by RAZAK GHAZALI

ALTHOUGH Islamic banks have been affected relatively worse than conventional banks by the loan moratorium period last year, the disruption could provide opportunities to diversify and accelerate expansion once the pandemic subsides.

Bank Islam Malaysia Bhd CEO Mohd Muazzam Mohamed (picture) told The Malaysian Reserve that Covid-19 should be seen as a window of opportunity to grow sustainably.

“Bank Islam in its five-year plan intends to strengthen its wholesale banking proposition leveraging the group’s wholesale banking capability within corporate banking, capital markets, treasury, asset management and stockbroking,” he said.

“There is also the potential for Islamic finance tools to play a greater role in trade, which could help boost economic recovery in emerging markets; new opportunities for Islamic finance markets, such as the provision of Shariah-compliant trade finance products; and trade development programmes to promote a stronger focus on social impact, sustainability, innovation and digitalisation,” Mohd Muazzam added.

For the financial year 2020 (FY20), the lender recognised a one-off loss of RM136.4 million arising from the modification of the expected cashflow of the moratorium financing.

A pre-emptive impairment provision in the form of management overlay of RM231.6 million has also been made in FY20 in consideration of the challenging economic environment.

Covid-19 is once again taking its toll on economic activities as the third wave prompts new restrictions, but the vaccine news is a gamechanger for the outlook over the next two years.

Bank Negara Malaysia forecast GDP will rebound amid low unemployment, but with inflationary pressures.

Such a positive outlook for 2021 will be backed by favourable global growth projection and a revival in domestic economic activities. In turn, this will bode well for financial market performance.

As part of its business plan for 2021, Bank Islam is embarking on a five-year roadmap to deliver the promise of technology, redefine growth and work in new ways to address the unprecedented challenges the economy faces.

The plan mobilises six strategic objectives premised on the bank’s role as value-based intermediary, namely sustainable prosperity, value-based culture, community empowerment, customer centricity, real economy and digitalisation.

“The objectives will be supported by key initiatives, directly focused efforts towards the end goal in 2025 — such as to expand portfolio relating to real economy and green economy, implement integrated wealth management business model, accelerate digitalisation, promote social finance and enforce cost-management initiatives,” Mohd Muazzam added.

By 2025, the bank aims to be a champion in offering Shariah environmental, social and governance total financial solutions with leadership in digital banking and social finance.

Relative to conventional institutions, Islamic banks are perceived to be more exposed to small and medium enterprises, microfinance and retail lending, particularly in Asia.

Islamic banking has enjoyed strong growth in the past years, but S&P Global Ratings projected a record lowto mid-single-digit growth in 2020-2021 due to both the pandemic and oil price uncertainty, compared to 11.4% growth in the year earlier which was underpinned by a more dynamic sukuk (Islamic bond) market and new growth opportunities.

S&P believes Covid-19 could unlock the long-term potential of the sector, arguing the pandemic provides “an opportunity for more integrated and transformative growth with a higher degree of standardisation, stronger focus on the industry’s social role and meaningful adoption of financial technology”.

BIMB Holdings Bhd, which owns Bank Islam, gained three sen to RM3.91 at yesterday’s closing.