KUALA LUMPUR: The priority for Malaysia Building Society Bhd (MBSB) in the near term is to continue to close its gap in becoming a full-fledged Islamic bank – something it aspires to achieve in the next five years.
The move from being a non-conventional bank to an Islamic bank is to prepare itself for any potential corporate exercise.
“Any form of corporate exercise of a financial institution will require Bank Negara’s blessing but this is something in the future,” MBSB chief executive officer Datuk Ahmad Zaini Othman told reporters after its AGM yesterday.
He said that any possible merger would require the Employees Provident Fund’s (EPF) approval and laborious study by the board.
Asked if the company was in talks with any other banks to achieve the goal, he said: “Not at this stage.”
But this was up to the major shareholders to push to the regulators should there be something that they thought was worthwhile, he said.
Asked whether MBSB would be merging with an Islamic bank, he said: “It would be, logically.”
It has been previously speculated that Bank Islam Malaysia Bhd was an ideal merger candidate for MBSB that was supposed to be turned into a mega-Islamic bank under a merger exercise that also involved CIMB Group and RHB Capital Bhd.
Currently, about 80% of MBSB’s assets are Islamic assets.
In terms of timeline, Zaini hinted that it could happen this year or next but pointed out that the critical part was to close its gap to being a full-fledged bank that met the regulators’ requirements.
MBSB would align its operations, processes and systems in line with the regulatory framework of the central bank, he said.
“Then, the timeline will just fall in place,” he said.
Zaini also said that becoming an Islamic Bank was part of its business plan.
For the past two years, measures and processes had been put in place so that it ran like a bank, he said.
“It’s a must. If you look at the business environment, we need to transform to move to that new environment,” he said.
Zaini said MBSB had wanted to start the five-year plan earlier but the mega bank merger which involved CIMB Group and RHB Capital proposed in June last year made the management put the the plan on hold. The mega merger was called off in January this year.
He also said the capital requirement for it to move towards that vision had been there.
On whether it would apply for a new banking licence, he said yes, but noted that it would be a longer journey and that there would be more pressure on its major shareholder to get the required capital.
Looking ahead, it aims to grow its loans from 3% last year to between 7% and 8% this year.
Its focus would be on quality loan growth rather from a pure number perspective.
“Last year was a unique year… we were distracted by eight months of hibernation,” he said, referring to the mega deal.
Now, it will “re-activate” its original business plan.
Among the improvements it’s looking at include its continual effort to reduce its non-performing loans to below 3%. It also targets to grow its corporate segment from 12% to 20%.
The shift to emphasise on business financing is to mitigate the decline of its personal financing segment, which has been its bread and butter.
Going forward, it would streamline its resources and could embark on a rightsizing programme involving about 10% of its 1,500-strong workforce.