Bank Rakyat tackles high cost of funding

KUALA LUMPUR: Bank Kerjasama Rakyat Malaysia (Bank Rakyat) is looking at ways to increase its cash flow to cope with rising cost of funding, which dragged down its earnings last year.
The bank reported an 8.08% drop in profit after tax and zakat to RM1.82 billion for the financial year ended Dec 31, 2015 compared with RM1.98 billion in 2014, due mainly to the increase in the cost of funding to depositors.
Revenue, however, rose 6.1% to RM6.43 billion from RM6.06 billion, supported by income from financing of RM4.65 billion.
Bank Rakyat announced a 13% dividend payout amounting to RM385 million for 2015, which is lower than the 15% payout in 2014.
While anticipating the cost of funding, which went up 12%-13% in 2015, to remain high this year, chairman Tan Sri Abdul Aziz Zainal said Bank Rakyat will strive to increase its cash flow through more aggressive initiatives.
"We've to generate new income from somewhere to complement the rise in cost of funding, so we need to have high cash flow to reduce our cost. We're trying to get more people to deposit their money through the current account. This is one of the ways to get more cash flow," he told reporters after the announcement of Bank Rakyat's financial results for 2015.
Bank Rakyat's gross financing balance was up 3.8% to RM64.46 billion despite more stringent measures to curb household debt. Of that, consumer gross financing accounted for RM59.58 billion.
For 2016, loan growth is projected to be in the range of 5% to 7%.
The bank's total assets grew 3.5% from RM89.31 billion to RM92.4 billion, in line with the slower growth in the economy.
Total deposits grew 3.6% to RM70.98 billion despite thinner liquidity in the economy, of which 21.2% was retail deposits.
On asset quality, it registered a lower gross impaired financing ratio of 1.89% in 2015 against 2.04% in 2014, thanks to more robust recoveries.
Bank Rakyat continued to maintain a strong capital position with a risk weighted capital ratio and a core capital ratio of 20.7% and 19.48%, respectively.
Abdul Aziz said the bank's performance remained commendable in view of the challenging year arising from the impact of internal and external developments.
"We hope to register better results in 2016 and a dividend payout of not less than 13%. We wish to increase the dividend payout to be in the range of 13% and 16%," he noted.
Abdul Aziz expects Bank Rakyat to sustain its profit before tax and zakat at RM2 billion in 2016 after having registered RM2.01 billion in 2015, which is 8.22% lower than the RM2.19 billion achieved in 2014.
"We're going to be more aggressive in the middle part of the year, we're slowing down perhaps in the beginning, we should be able to achieve more than RM2 billion in terms of profit before tax," he said.