PETALING JAYA: MALAYSIA BUILDING SOCIETY BHD (MBSB) recorded a 63.3% drop in net profit to RM85.56mil in the second quarter ended June 30, 2015, compared with RM232.86mil in the previous year. The non-bank lender attributed the decline to impairment losses on loans, advances and financing.
The group said the losses were a continuation of the two-year impairment programme it initiated in the fourth quarter of 2014.
President and chief executive officer Datuk Ahmad Zaini Othman said earlier that the programme was a “necessary sacrifice” to put the group on stronger footing in the long term.
Revenue for the quarter grew 13.9% to RM765.78mil, mainly due to higher income from investments of liquid assets and higher financing income from its corporate segment, the group said in a filing with Bursa Malaysia.
Ahmad Zaini said the upward trend in revenue was a result of a conscious effort in pursuing a balanced and healthy exposure between corporate and retail segments.
“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,” he said.
The impairment programme and collection recovery strategies put in place have so far improved MBSB’s net impaired financing ratio to 3.8% in June, from 4% in March.
As at June, its total assets grew 8.9% to RM41bil from RM37.7bil in December, contributed by its liquid assets.
“The efforts to increase our 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 our second quarter operating income as compared to the previous quarters,” said Ahmad Zaini.
During the quarter, MBSB’s cost-to-income ratio stood at 23.4%, improving 1.1% compared with 24.5% in the first quarter.
It currently finances several affordable housing projects and provides end financing for eligible affordable home buyers. It plans to increase its industrial hire purchase financing programmes by establishing equipment financing hubs in Penang and Johor Baru.
“The group’s efforts in putting in place more stringent prudential standards and the overall impairment programmes have increased pressure on our bottom line,” said Ahmad Zaini.
MBSB said it will continue to strengthen, adapt and sustain its corporate and retail business activities to compete in the challenging environment. These include strategies for continued improvement in compliant operational workflows, enhancing assets quality based on risk management framework and funding from capital markets.
The group expects a satisfactory performance in 2015.
MBSB said its annualised group revenue growth for the second quarter met its targeted headline key performance indicators, mainly due to higher income from investments and higher financing income from corporate segments. “However, the annualised group net return on equity did not meet the target set mainly due to lower operating profit as a result of lower net income from retail financing and loans,” it said.
Its 2015 target annualised net return on equity is 12.5%, while annualised group revenue growth is 10%.
As at the second quarter, MBSB’s annualised net return on equity was 8.8% while annualised group revenue growth was 11.5%.
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