MBSB's 2Q net profit down 26% on impairment losses

KUALA LUMPUR (Aug 8): Malaysia Building Society Bhd (MBSB) posted a 26.34% decline in net profit to RM63.01 million or 2.21 sen a share in the second quarter ended June 30, 2016 (2QFY16) from RM85.55 million or 3.41 sen a share a year ago on higher allowances for impairment losses on loans, advances and financing.

Revenue increased 6.1% to RM812.52 million in 2QFY16 from RM765.78 million in 2QFY15.

For the first half of the financial year ended Dec 31, 2016 (1HFY16), net profit declined 53.38% to RM97.84 million or 3.44 sen a share from RM209.87 million or 7.67 sen a share despite a 11.64% increase in revenue to RM1.63 billion from RM1.46 billion.

In its bourse filing today, MBSB said the group's profit before tax (PBT) for 1HFY16 fell 60.3% to RM113.819 million from RM286.922 million in 1HFY15 mainly due to higher allowances for impairment losses on loans, advances and financing with the continuation of the impairment programme initiated by the group in the fourth quarter of 2014.

MBSB said it had embarked on a "Closing the Gaps" exercise since 2010 to bridge its frameworks to be in line with banking standards and best practices.

The impairment programme, which is in line with the recommendation by Bank Negara, is in addition to the existing impairment provision that is in compliance with current accounting standards, it added.

Revenue increased in 1HFY16 mainly due to higher income from investments in liquid assets and higher financing income from the corporate segment.

The group's cost to income ratio in 1HFY16 remained relatively consistent year-on-year (y-o-y), standing at 23.5%.

MBSB said gross income from personal financing as well as mortgage loans and financing in 1HFY16 was lower y-o-y due to lower disbursements and decreasing portfolio base.

Gross income from corporate loans and financing in 1HFY16 was higher y-o-y due to the continued growth of corporate loans and financing assets bases while gross income from auto finance loans and financing in 1HFY16 was relatively consistent y-o-y.

On prospects, MBSB said the operating environment for 2016 continues to be challenging.

MBSB said its focus on the expansion of the corporate business segment has shown positive contribution in terms of growth in corporate financing, loans assets and earnings.

The growth of the retail segment businesses continues on a moderate level as expected, it said.

"The group will continue to strengthen, adapt and sustain its corporate and retail business activities to compete in the challenging environment," the filing read.

"These activities include continued improvement in compliant operational workflows, enhancing assets quality based on risk management and credit frameworks, and funding from capital markets to boost the group funding requirements," it added.

MBSB also noted despite headwinds on the macroeconomic front, the banking sector continued to remain strong and well-capitalised, according to Bank Negara's first quarter report.

The banking system' PBT continued to register an increase of RM7.7 billion for the first quarter of 2016 (4Q15: RM7.2 billion) following improved revenue from treasury related activities and lower operating expenses while net impaired loans ratio stood at 1.2% of net total loans as at end-March 2016 (end-December 2015: 1.2%), reflecting the overall quality of the loan portfolio, according to MBSB.

However, it noted that total gross financing raised by the private sector through the banking system and the capital market amounted to RM286.6 billion (4Q15: RM331.4 billion).

Net lending to businesses by the banking system was lower by RM3.6 billion during the quarter (4Q15: RM4.9 billion) while net financing to the household sector expanded by RM7.1 billion during the quarter (4Q15: RM16.9 billion), it added.

MBSB shares closed 8 sen or 9.47% higher at 92.5 sen at noon market close, with a volume of 77.1 million shares done, for a market capitalisation of RM5.22 billion. —

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