The marked improvement is within expectations following the completion of the impairment programme in 4Q17, says CEO
by DASHVEENJIT KAUR / pic by HUSSEIN SHAHARUDDIN
Malaysia Building Society Bhd’s (MBSB) move to write back RM154 million on the allowance for impairment losses of financing assets saw its net profit for the first quarter ended March 31, 2018 (1Q18), triple to RM316.79 million from RM101.32 million reported in 1Q17.
“This follows the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9) effective January this year, hence indicating that we had actually undertaken a highly prudent impairment programme,” MBSB group president and CEO Datuk Seri Ahmad Zaini Othman said in a statement on Monday.
He noted that the marked improvement is within the group’s expectations following the completion of the impairment programme in 4Q17.
Net profit on a quarter-on-quarter (QoQ) basis increased by 155.52% to RM192.81 million.
The group’s 1Q18 revenue rose marginally to RM815.04 million compared to RM811.2 million made in 1Q17.
MBSB’s gross loans and financing grew 2.93% QoQ by RM1 billion to RM35.2 billion, largely contributed by corporate and property financing.
Its net impaired financing/loans ratio further improved to 1.82% from 2.11% (4Q17) and 2.76% (1Q17) resulting from the reduction in net impaired financing loans, together with the write-back of allowances on the financial assets’ impairment.
The growth in total assets of 3.81%, or RM1.7 billion year-on-year (YoY) and 3.66%, or RM1.64 billion, QoQ was contributed by higher liquid assets due to an increase in deposits.
In addition, YoY increase in total assets was due to growth in net financing.
MBSB’s deposit level rose by RM1.93 billion, or 6.02%, YoY to RM33.99 billion and by RM1.23 billion, or 3.76%, QoQ.
The group’s cost-to-income ratio declined to 26.71% from 19.72% in 1Q17, but the rise in costs was expected due to the merger exercise as well as higher funding costs.
Its cost-to-income ratio remained considerably better than the industry’s average of 49.7%.
Interest income stood at RM89.33 million, continuing to trend downwards on a YoY basis by 30.12%, or RM38.5 million, and on a QoQ basis by 21.84% or RM24.96 million.
This is due to the acquisition of only Shariah-compliant financial assets and the continued conversion of conventional loans to Shariah-compliant financing.
Net income from the Islamic banking operations declined by RM22.25 million YoY due to higher cost of funds and costs associated with the acquisition of Asian Finance Bank Bhd (AFB).
MBSB completed its acquisition of MBSB Bank Bhd, formerly known as AFB on Feb 7, 2018, making MBSB a financial holding company.
In addressing the merging of the group’s assets and liabilities, Ahmad Zaini said, “The first vesting of Shariah-compliant assets and liabilities was carried out on April 2, 2018. In the next three years, MBSB will continue to maintain its conventional receivables and perform conversion of these receivables into Islamic receivables, which will subsequently be vested to MBSB Bank.
“Any residual receivables that are not converted will either be redeemed by the account holders or disposed of to a third party,” he said.
The board will continue to build up MBSB Bank’s capabilities following the corporate exercise.
“We have realigned the group’s business, policies and operations, and continue to make investments to upgrade and enhance the information technology infrastructure and delivery channels,” he said.
As a new Islamic banking group in the industry, the group looks forward to expanding its products and services, which include trade finance, wealth management, and Internet and mobile banking to cater to various segments of its customers and depositors.