MBSB's 1Q net profit slumps by 71.98% on higher impairment allowances

KUALA LUMPUR (May 11): Malaysia Building Society Bhd (MBSB)’s net profit for the first quarter ended March 31, 2016 (1QFY16) slumped by 71.98% to RM34.84 million, from RM124.31 million in the corresponding period a year ago, 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.

The group’s revenue for the quarter under review, however, saw an increase of 17.7% to RM812.6 million, from RM690.6 million in 1QFY15. The increase was mainly due to higher income from investments in liquid assets and higher financing income from corporate segment.

Gross financing and loans growth shows a positive trend of 1.00% from RM34.11 billion (4QFY15) to RM34.45 billion (1QFY16), mainly contributed by the expansion in corporate segment. Meanwhile, the group’s net impairment financing and loan ratio stood at 3.07% in 1QFY16. Previously, it was at 2.81% in 4QFY15 and 3.98% in 1QFY15.

MBSB's gross impaired coverage ratio had increased to 93.69% in 1QFY16, from 92.23% in 4QFY15. On this, Dato’ Ahman Zaini Othman, president and chief executive officer of MBSB said in a statement, “The impairment programme we had embarked on, provided further coverage of the gross impaired loans and financing. As we have always informed our stakeholders, the programme should bring us closer to the industry’s standards.”

Cost to income ratio stood at 22.15% in the 1QFY16, easing further from 22.66% in 4QFY15 and 24.52% in 1QFY15. On funding and liquidity, the group realized a deposit growth of 6.67% or RM1.91 billion, arriving at a total deposit balance from customers of RM30.49 billion in the quarter under review, from RM28.58 billion in the corresponding quarter a year ago.

Investment in liquefiable assets which exceed RM1 billion in 1QFY16, are aimed to further strengthen the MBSB’s liquidity position.

“I believe the industry has made some adjustments in preparation of another difficult year. As for MBSB, we undertook initiatives to address this as well, and we have seen the desired results. We will continue to increase our business focus in the affordable housing projects and government’s contracts, put in more strategic efforts to preserve and strengthen asset quality, plus maintain a superior cost to income ratio,” Azman Zaini said. – theedgemarkets.com

Do not ask your brother about the value of your home. Click here at The Edge Reference Price to find out.