KUALA LUMPUR: Bank Islam Malaysia Bhd said the group is making good progress in its turnaround plan and is focusing on increasing its fee-based income over the next few years.
The bank, which reported a profit before zakat and tax of RM165.8mil for the first half ended Dec 31, 2006, said writebacks accounted for 60% of pre-tax profit, which Bank Islam said showed the effectiveness of its strategies.
“The low-hanging fruit has been reaped,'' managing director Datuk Zukri Samat told a media briefing yesterday, adding that the bank's performance in the second half might not be as robust because writebacks would shrink although its operations could improve.
The profit before zakat and tax is a big improvement over the loss of RM43.2mil reported in the corresponding period of 2005. Revenue for the first six months came in at RM467.8mil.
The profit translates to a return on shareholders’ equity of 17.6%.
Total assets grew by RM3.1bil to RM17.7bil and customer deposits improved by RM1.4bil to RM15.8bil. The bank's risk-weighted capital adequacy ratio at the end of last year was 11.7%.
Zukri said the return to profits after two years of losses put the bank back on track to capitalise on the recent incentives announced by the Government to deepen the development of the Malaysian Islamic Financial Centre.
“Going forward, we will have our dedicated loan recovery unit continue to do what it does best while we reposition the bank to take advantage of existing and new opportunities arising from the development of Malaysia as an international Islamic financial centre.
“In addition, we have begun our re-branding exercise and to improve on our service delivery as part of our overall strategy to stay competitive,” he added.
As part of the rebranding, the bank's branches are being remodelled in stages at a cost of RM600,000 each.
As to recapitalising and improving the bank's balance sheet, Zukri said a plan had been formulated to address legacy non-performing finances that would see NPLs being sold to a special purpose vehicle. This is expected to take place before the end of the financial year.
He said the plan would remove RM2.5bil of NPLs, effectively cleansing the bank's books – which has a gross NPL ratio of 25% – and leave it to focus on the good assets and lending business.
For the revamp of the group's IT infrastructure, Zukri said the board had approved a new blueprint for a bank-wide IT system costing more than RM100mil. The system is expected to be completed by June 2008.
On the ongoing transformation programme, he said new talent had been recruited for key positions and that the bank had set up a corporate investment banking division as well as beefed up its treasury and cash management divisions.
These new divisions will spearhead the bank's move towards having fee-based activity contribute 20% of group income from 5% now.
Zukri also said Bank Islam, through these divisions, would be launching a sukuk worth more than RM1bil from mandates received so far.
“The fruits of our labour (in these areas) will be fully reaped during the 2008 financial year,'' he said.