MBSB hopes to get nod for bank status by year-end

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) hopes to obtain the necessary approvals from Bank Negara Malaysia (BNM) to become a full-fledged banking institution by the end of this year.

CEO Datuk Ahmad Zaini Othman told The Edge Financial Daily that MBSB will first have to satisfy the requirements under the new Financial Services Act (FSA) which is expected to come into force by the middle of this year.

“(Accounting firm) Ernst and Young is assisting us (to get the necessary approvals),” he said, noting that the application will be submitted once MBSB clears and closes certain gaps with regard to some of its operations and businesses.

The non-bank lender, a subsidiary of the Employees Provident Fund (EPF), currently provides personal and home loan financing to civil servants and private sector employees.

It also offers bancassurance products and financing for property development projects and purchase of commercial properties. It also offers corporate loans, as well as savings and fixed deposit services.    

MBSB has civil servants as its main clients, while its corporate clients remain largely government agencies, federal and state government-linked companies (GLCs). Total deposits from corporate and retail clients stood at RM21.5 billion as at Dec 31 last year.

MBSB, which received the green light from the Ministry of Finance in 1972 to undertake its financing and deposit-taking businesses, now needs to gain the Development Financial Institution (DFI) status from BNM to become a full-fledged banking institution.

With the FSA coming into force soon, several existing acts including the Banking and Financial Institutions Act 1989 (BAFIA), the Insurance Act 1996, the Exchange Control Act 1953 and the Payment Systems Act 2003, would be repealed.

At the MBSB AGM last Friday, Ahmad Zaini said his duty as a CEO is to ensure that he builds value for the company.

“If we are going to operate like a bank under the FSA, we might as well become a (full-fledged) bank,” he said, adding that this move will better prepare MBSB in the event of a merger or acquisition.

There have been reports that EPF might be considering a merger between MBSB and its sister company, RHB Bank Bhd, to unlock the value of both financial institutions. Ahmad Zaini, however, quashed this rumour.

“Whatever exercise is taken, MBSB will need to look at how much it will benefit the shareholders,” he said.

Meanwhile, MBSB plans to raise its equity capital from RM3 billion currently to RM4 billion over the next three to five years to expand its business which is largely dominated by personal financing for the civil service segment.

The non-bank lender also plans to grow its personal financing segment to RM1 billion per month.

MBSB recorded a 53.2% jump in pre-tax profit to RM656.2 million for the financial year ended Dec 31, 2012 (FY12) from RM428.3 million in FY11.


This article first appeared in The Edge Financial Daily, on 13 May, 2013.