DATO’ MOHD MUAZZAM MOHAMED Group Chief Executive Officer Dear Stakeholders, As we commemorate the 40th anniversary of Bank Islam, it is a moment of introspection and gratitude – a time to contemplate the very essence of our existence amidst a landscape teeming with banking institutions. The question arises: Why does Bank Islam exist? Our answer transcends the conventional success metrics; we aim to integrate profitable growth with meaningful value and purpose. We are committed to ensuring inclusivity, ensuring that our benefits reach everyone as an Islamic bank should and that no one is left behind. This past year has showcased our commitment and resilience. Faced with a confluence of challenges – market volatility, escalating regulatory demands, and the imperative to integrate Environmental, Social, and Governance (ESG) considerations into our core strategies – we have not only sustained but thrived. I am pleased to report that Bank Islam has demonstrated commendable performance, achieving both profitability and growth. OPERATING ENVIRONMENT In 2023, Bank Islam navigated a challenging and unpredictable financial landscape, particularly regarding Malaysia’s Overnight Policy Rate (OPR) expectations. At the end of 2022, forecasts indicated a potential rise in the OPR for early 2023, prompting the banking sector, including us, to adjust deposit rates in anticipation. Contrary to these forecasts, the OPR remained unchanged in the early months of 2023, leading to an increased cost of deposits and, consequently, a reduction in our Net Income Margin (NIM) from 2.28% in 2022 to 2.06% in Q1 2023. This unexpected development required a strategic and prompt response to align our funding costs with the prevailing rates, thereby protecting our profitability. Through targeted adjustments to our funding profile, we managed to mitigate the impact of the static OPR. These efforts resulted in a sequential improvement in our NIM to 2.11% in Q2, 2.17% in Q3 and further sustain the momentum to achieve a NIM of 2.13% in Q4, resulting in overall NIM of 2.12% for 2023. The strategy addressed the immediate challenge and reinforced our financial stability, showcasing our ability to respond effectively to market dynamics. ‘’In the name of Allah, the Most Compassionate, the Most Merciful All praise is due to Allah, the Lord of the Worlds, and peace and blessings be upon the Prophet Muhammad, whom Allah send as mercy to the universe, which Allah make him a guiding and a rightly guided man, and an illuminating lamp. And peace and blessing on his family and companions, and those who followed them benevolently until the Day of Judgment and then after. May Allah’s peace, mercy and blessings be upon you.’’ Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023 20 From the Desk of the GCEO
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