MBSB to complete impairment by next year

  • Business
  • Tuesday, 06 Dec 2016

Making a point: (from left) Tiong, Ahmad Zaini and MBSB senior vice-president Datuk Nor Azam at the briefing.

PETALING JAYA: MALAYSIA BUILDING SOCIETY BHD (MBSB), whose earnings have been impacted by impairments for almost two years, hopes to end its impairment programme by next year, says its president and chief executive officer Datuk Ahmad Zaini Othman.

He was commenting on the question as to whether the non-bank lender would be putting more allowance for impairment, moving forward, after a signing ceremony between ECOFIRST CONSOLIDATED BHD’s subsidiary, EcoFirst Hartz Sdn Bhd, and MBSB.

The ceremony was for loan facilities of RM189.95mil to be given the former to finance the purchase of land and the development of its estimated RM5bil Ampang Ukay project.

“The impairment programme is going on as planned and is part of our effort to streamline our business and operations to be more like a bank.

“We started this in the fourth quarter of financial year 2014 and we will end our impairment by 2017. So, hopefully by then, there is a completion of the impairment programme.

“The year 2018, as you know, is the implementation of the International Financial Reporting Standard (IFRS) 9, where new accounting standards for banks come into play, and we will assess that accordingly,” he told reporters.

The financial institution’s credit cost stood at about 2% currently, he said.

“As you know, we still make good profit. If we had not gone into the impairment exercise, we would have got RM1.2bil more profit before tax.

“This impairment is not about putting aside funds for bad loans. It’s putting aside against our portfolio which is RM40bil now.

“So, we must continue to make more operating profit and it’s a lot of hard work,” he added.

The IFRS 9 or the Malaysian equivalent of MFRS 9 will come into effect in January 2018 and is based on an expected loss model unlike the existing standard, which is based on the incurred loss model. There are concerns that the adoption of the new standard could lead to higher provisions by banks.

On reports that MBSB is in merger and acquisition talks with Asian Finance Bank Bhd (AFB), Ahmad Zaini said “it’s an issue for shareholders to decide”.

As to whether AFB would make a good candidate, he replied that the company thought that the last attempt was almost in the bag, but it did not materialise.

“At the end of the day in any corporate exercise, it’s about pricing. If the pricing if right, I suppose it’s okay. As far as management is concerned, it’s business as usual. If today or tomorrow, the shareholders decide that we should be doing a certain corporate exercise, it’s management’s responsibilty to facilitate it.”

MBSB, which has been trying to transform into an Islamic bank to increase its competitiveness, aborted its proposed merger with Bank Muamalat Malaysia Bhd early this year, reportedly due to disagreements over valuation and control.

It was also part of the failed three-way merger with CIMB GROUP HOLDINGS BHD and RHB Capital Bhd that was called off in January last year amid falling oil prices.

In the third quarter ended Sept 30, its net profit fell 8.8% to RM57.93mil on higher allowances for impairment losses on loans, advances and financing.

Meanwhile, EcoFirst CEO Datuk Tiong Kwing Hee said the financing facility would enhance the property developer’s capabilities to achieve its vision of Ampang Ukay as Kuala Lumpur’s Little Hong Kong, offering retail convenience and amenities.

The loan will finance the development of Liberty Arc@Ampang Ukay, the first phase of development. Liberty Arc comprises three towers with 1,632 units of small office-home office and 32 ground-floor retail units.

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