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MBSB's 1Q profit falls 73.5% on higher expected credit losses

KUALA LUMPUR (May 15): Malaysia Building Society Bhd (MBSB) reported a 73.5% net profit fall in its first quarter ended March 31, 2019 (1QFY19) to RM83.83 million from RM316.79 million a year ago, due to higher expected credit losses (ECL).

This brought earnings per share for the quarter down to 1.31 sen from 5.33 sen previously, MBSB's stock exchange filing today showed.

Revenue for 1QFY19 declined 3.8% to RM784.04 million from RM815.04 million a year ago, it added.

The increase in ECL was mainly because 1QFY18 had recorded a writeback as a result of staging improvement from stage 2 to stage 1, MBSB said.

According to the bank, financial assets with a 12-month ECL is recognised in "Stage 1", while those which are considered to have a significant increase in credit risk are in "Stage 2", and those for which there is objective evidence of impairment and are considered impaired are in "Stage 3".

Meanwhile, it said its cost-to-income ratio for 1QFY19 improved slightly to 26.3% from 26.7% in 1QFY18 and remains well below the industry's average of 48.6%.

"Despite the ongoing challenges including the impact of higher expected credit losses, we are registering stable growth in revenue, net operating income and still maintained a cost-to-income ratio of 26.34% which is below the industry average," said group president and chief executive officer Datuk Seri Ahmad Zaini Othman in a statement today.

On 2019 outlook, Ahmad Zaini said while the Malaysian economic condition remains challenging, the group will remain focused on expanding its banking capabilities. "With this, the bank's technology transformation shall continue to be in the centre stage. On another front, we also aim in increasing our fee income based activities to make up 35% of its income by end of 2020."

Barring any unforeseen circumstances, the group expects its prospects for the year to be satisfactory.

At 2.55pm, shares in MBSB were down 1 sen at 96 sen today, giving the group a RM6.13 billion market capitalisation.

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