MBSB’s Q2 earnings down sharply on loan impairment losses


  • Banking
  • Thursday, 06 Aug 2015

KUALA LUMPUR: MALAYSIA BUILDING SOCIETY BHD’s (MBSB) net profit fell 63.2% to RM85.55mil in the second quarter ended June 30 mainly due to allowance for loan impairments.

The non-conventional bank said on Thursday the impairment for Q2, 2015 was RM134.25mil compared with a writeback of RM15.19mil a year ago.

This resulted in a sharp fall in its earnings in Q2 FY15 compared with earnings of  RM232.85mil a year ago.

MBSB said the higher allowances were for impairment losses on loans, advances and financing with the continuation of the impairment programme initiated by the group in the fourth quarter of the previous year.

Revenue, however rose 13.9% to RM765.70mil against RM672.08 while earnings per share were 3.41 sen compared with 8.85 sen last year.

In the first half ended June 30, 2015, its earnings fell 51% to RM209.86mil from RM429.59mil in the previous corresponding period. The sharp fall in the earnings was due to the allowance for impairments totalling RM235.57mil.

MBSB president and CEO Datuk Ahmad Zaini Othman: “We remain committed to the impairment programme that was emplaced end of last year as this is important to ensure that our efforts to increase the level of collective assessment allowances as part of closing the gap.” 

“We are encouraged by the upward trend in revenue principally due to the group’s expansion in corporate segment, a conscious effort that we had continued to exert in ensuring that a balanced and healthy exposure is achieved between corporate and retail  segments,” he said.

Ggross  income  from  personal  financing during the period was lower compared to the previous year corresponding  period due  to lower disbursements and decreasing portfolio.

Gross income from corporate loans and financing in the current  period  was  higher  compared  to  the  previous  year  corresponding  period due  to the continued growth of corporate loans and financing assets bases.

Revenue rose to RM1.45bil from RM1.33bil in the same period a year ago. 

MBSB’s total assets of RM41bil as at June 30, grew by 8.9% to RM3.3bil from RM37.7bil as at Dec 31, 2014. 

Notably, the group’s liquid assets contributed to the growth. It grew by 47.5% or RM2.7bil reflecting efforts to increase the group’s liquid assets ratio to above 25%.

Ahmad Zaini said the efforts to increase its liquid assets via  deposits, issuance of Sukuk and Cagamas securitised financing in order to have a better liquidity coverage directly increases our funding cost. This has lowered its second quarter operating income as compared to the previous quarters.

The impairment programme and collection recovery strategies have improved the group’s net impaired financing ratio from 4% as at March 31 to 3.8% as at June 30.

Its cost to income ratio of 23.4% saw an improvement of 1.1% compared to 24.5 % in the preceding first quarter 2015.

On its present business plans, MBSB currently supports the government’s National Housing Project through the financing of several affordable housing projects as well as providing end financing for eligible affordable homebuyers and plans to increase its industrial hire purchase financing programmes by establishing equipment financing hubs in Penang and Johor Bahru.

“The group’s efforts in putting in place more stringent prudential standards and the overall impairment programmes have increased pressure on our bottom line,” Ahmad Zaini said. 

He said that it was something the group had to endure in order to have the entity conform towards a sustainable banking-like platform and maintain a healthy reasonable return on equity in the future.

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