MBSB to reduce expected credit loss on stronger customer engagement

Now, it’s all about collection and engagement with customers. The faster we collect, the faster we can do some writebacks, says CEO


MALAYSIA Building Society Bhd (MBSB) remains focused on reducing its exposure to expected credit losses (ECLs) in the coming quarters by encouraging its customers to regularise their instalment arrears.

MBSB group president and CEO Datuk Seri Ahmad Zaini Othman (picture) said the lender was in the red for the first quarter ended March 31, 2020 (1Q20) due to the increase in ECLs as a result of staging deterioration for loans and financing.

“MBSB Bank Bhd, which is a subsidiary of MBSB, granted a six-month moratorium to eligible customers starting April 1, 2020. Now, it’s all about collection and engagement with customers. The faster we collect, the faster we can do some writebacks,” he told the media after the company’s 50th virtual AGM press conference yesterday.

Last week, MBSB posted a net loss of RM73.25 million in 1Q20 versus a net profit of RM83.83 million a year ago on high allowance impairment charges on loans, financing and advances due to an increase in Stage 2 and Stage 3 financing.

MBSB’s treasury activities remain active and are expected to increase its income contribution in the current year, Ahmad Zaini said.

MBSB Bank has granted over 200,000 eligible customers the six-month moratorium with existing loans, advances and financing (LAF) of over RM5 billion, which is about 14% of the group’s LAF.

The total collection from customers across the moratorium period is about RM1.5 billion.

MBSB saw a slight increase in the impairment ratio for 1Q20 as a result of Covid-19.

In line with the Malaysian Financial Reporting Standards 9, MBSB set aside a higher allowance of impairment as at end of 1Q20 and is expected to see higher ECLs for 2020 compared to 2019. In terms of loan growth for the year, Ahmad Zaini noted that MBSB is looking at 3%-4% loan growth for 2020 and 2021.

MBSB Bank is targeting government servants under its revised business plan as the segment is viewed to be quite stable, he added.

The Islamic bank’s main growth driver will remain trade finance and export of commodities, as sectors such as travelling and tourism continue to be weak.

“We are really putting more emphasis on the personal financing and product bundling of such products, and treasury products and services. These will supplement and support our income and profit in months to come,” he said.

Ahmad Zaini added that the group is planning to collapse the existing group structure in the near future with the bank taking over the listing status.

“We hope MBSB Bank will have better market penetration and liquidity to risk equity in a more wholesome way and engage with all the investors locally and internationally who are looking for Shariah-compliant shares,” he said.

On the conversion process of its conventional assets to Islamic assets, Ahmad Zaini said MBSB has completed 12 phases of conversion, involving a value of over RM659 million or about 25%, since April 2, 2018, being the date of the firm’s operational Day 1.

“We are expecting to convert all our existing conventional assets into Islamic assets by 2021. As at March 31, 2020, we had a gross balance of RM1.84 billion (or net balance of RM1.08 billion) of conventional loans.

“So far we are on track, but I reckon that under the presence of the pandemic situation, we need to seek the central bank’s indulgence,” he said.