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MBSB eyes 40% revenue from corporate lending

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) aims to increase the revenue contribution of its corporate lending segment to 40% by the end of next year from the current 30%, according to CEO Datuk Ahmad Zaini Othman.

Zaini said approved corporate loans this year stood at RM1.8 billion, of which up to RM1.3 billion had been disbursed. This excluded lending for private finance initiatives (PFI), such as for the construction of public university campuses.

Zaini told reporters yesterday after signing a financing facility with Gambier Sanctuaries for a mixed-use development in Bukit Gambier in Penang that to achieve the 40% revenue target, MBSB needs to increase corporate loans to between RM3.2 billion and RM3.5 billion.

The higher target for corporate lending is in response to a July ruling by Bank Negara Malaysia (BNM) to cap the tenure for personal loan financing to 10 years from 25 years.

MBSB’s retail lending segment presently makes up 70% of the company’s revenue.

“Definitely, there will be a decline in personal loan financing. But it’s not an issue to us because we are moving into corporate lending,” Zaini said.

RHB Research said in a report yesterday that the muted potential of MBSB’s retail portfolio and personal financing business saw its share price shed 10% in the past three months.

According to Zaini, the BNM ruling may be good for the company as it has locked in its existing receivables, as borrowers will not refinance.

“Corporate property financing is something we are quite familiar with,” he said, adding that this coupled with contract financing, such as the PFI programme, carry lower risks.

“In a banking environment, you do need to diversify your portfolios and not put all your eggs in one basket,” said Zaini.

MBSB yesterday signed a deal with Gambier Sanctuaries to provide financing to the tune of RM155 million for the latter’s mixed-use development in Bukit Gambier.

The project has a total gross development value of RM600 million.

“We always look at the strength of the company in private property developments. Gambier Sanctuaries has been around for a long time. It is a conservatively managed company,” said Zaini.

MBSB also offers training on in-house expertise in selecting property projects to finance.

Zaini said its project monitoring and management division is “one-of-a-kind” in the financial industry.

“We are increasing from two to three technical teams of engineers, architects and valuers.”

MBSB senior vice-president (corporate business division) Nor Azam M Taib said the company has implemented a three-tier mapping system to evaluate projects that developers are looking to build.

Senior vice-president (retail business division) Azman Aziz told The Edge Financial Daily that MBSB is mitigating risks in lending to non-civil servant retail customers.

“We are looking to tap into creditworthy employees from top-notch companies and government-linked companies,” he said, adding that he expects non-civil servant retail loans to grow 10% to 20% a year.

 

This article first appeared in The Edge Financial Daily, on October 25, 2013.

 

 

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