KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) is monitoring its expected credit losses (ECL) and managing its impairments more aggressively to negate any effects to its financial performance for the full year ending Dec 31, 2019 (FY19).
MBSB’s net profit had fallen 73.5% to RM83.83 million for the first quarter ended March 31, 2019 against RM316.79 million in the previous corresponding period, dragged down by higher ECL. The increase in ECL was due to writeback recorded in Q118 as a result of staging improvement from stage 2 to stage 1 impairment.
President and CEO Datuk Seri Ahmad Zaini Othman said it is difficult to tell whether there will be higher ECL for FY19. He said technically the ECL should not be higher, but noted that it is about how the bank manages and collect its credit.
“As long as we’re able to retain and manage the ECL, we should be able to neutralise it. The existing ECL is something that we’re consistently monitoring and doing the full recovery,” he told reporters after its AGM today.
He said there will still be certain percentage of impairments from personal financing and the retail segment, but emphasised that it needs to observe and manage the corporate impairments well.
“So far things are looking okay, we’re managing that well. Existing impairment is all about collection. We’re going on an aggressive approach towards collection. We’ve got a new collection system, putting in more workforce towards recovery of early care accounts – one to two months kind of accounts. That hopefully would manage our impairments moving forward,” explained Zaini.
He also pointed out that the Malaysian Financial Reporting Standards 9 requires the bank to provide for late payment of even one or two days, which is a challenge for the entire industry.
Meanwhile, MBSB expects to have fully syariah-compliant securities on Bursa Malaysia within two years, with MBSB Bank Bhd eventually being the holding company.
Zaini said over 85% of its conventional assets have been converted into Islamic assets with about 12% remaining to be done.
“It opens up more opportunities for us. (Having) Syariah-compliant stocks is easier to attract more investments.”
In April 2018, MBSB became a full fledged Islamic bank after it acquired Asian Finance Bank.
Zaini said MBSB is looking at new streams of business, including trade finance, treasury, wealth management products and services, as well as alternative financial services like peer-to-peer lending.
“We started doing trade finance and we’ve got facilities of about RM500 million in just a few months. We’re putting in place the new trade finance platform and new talent,” he added.
Meanwhile, MBSB is aiming for a loan growth of 5% this year, from 3% last year, helped by the new revenue stream.
On the recent overnight policy rate cut, he said this will benefit the bank as 63% of its portfolio are fixed rates.
