MBSB's 1Q profit falls as bad loan allowance jumps

KUALA LUMPUR (May 7): Malaysia Building Society Bhd (MBSB) saw its net profit dropped 37% to RM124.31 million for its first quarter ended March 31, 2015, from RM196.73 million a year earlier, mainly due to significantly higher bad loan allowance as Islamic banking net income fell.

In its filing with the exchange today, MBSB said net profit had also fallen on higher operating expenses. The profit fall was despite revenue increasing to RM690.6 million, from RM667.11 million.

“The higher allowances for impairment losses are in line with the group’s ongoing impairment programme under its strategy to align its policies with industry best practices and banking standards.

"The revenue performance shown in the first quarter of 2015 is partly due to the company’s substantial efforts in penetrating the corporate segment and this has resulted in a slight asset growth amidst a challenging retail banking environment,” said MBSB president and CEO Datuk Ahmad Zaini Othman.

According to MBSB's income statement, allowance for impairment loss on loans, advances and financing jumped to RM101.32 million, from RM15.19 million.

Looking ahead, Ahmad Zaini said the group remained optimistic as it implemented its five-year growth plan.

Ahmad Zaini said the plan outlined MBSB's strategy from 2015 to 2019.

“We are pleased that the implementation of the new five-year Business Plan 2015-2019 has shown some positive progress. The plan focuses on sustaining profitability and maintaining a return on equity within the industry level.

"Barring unforeseen circumstances, we remain optimistic that we are on track to achieve the desired targets,” he said.

At 2.58pm today, MBSB shares fell two sen or 1% to RM2.04, bringing its market capitalisation to RM5.54 billion.

The stock had fallen 15% this year, underperforming the FBM KLCI's 3% rise.