Malaysia Building Society’s (MBSB) 3Q14 net profit  of MYR192.4m  fell 17.4%  QoQ  (+63.4%  YoY)  due  to  higher  impairment  allowances  on loans,  rising  operating expenses as well as lower non-interest income. 3Q14 loan growth remained  muted  while  NIM was  stable  QoQ at 3.86% (2Q14:  3.83%).  Management  updated  that  efforts  to  close  the  gaptowards a full-fledged banking institution have been completed in 3Q14.

Results highlights.  MBSB’s 3Q14 net profit of MYR192.4m fell 17.4% QoQ (+63.4% YoY) due to a combination of: i) impairment allowances of MYR26.1m  vs  a  MYR15.2m  writeback  in  2Q14,  ii)  higher  operating expenses  with  the  cost-to-income  ratio  (CIR)  rising  to  20.3%  (2Q14: 18.8%),  and  iii)  lower  non-interest  income  (-31.2%  QoQ).  However, these  were  partly  offset  by  higher  income  from  its  Islamic  operation (+13.3% QoQ). Net interest margin (NIM), which fell a  sharp 67bps QoQ to 3.84% in 1Q14, was stable at  3.86% in 3Q14.  Loans grew a modest 1.4%  QoQ  (+2.3%  YTD),  reflecting  the  subdued  environment (particularly  for  personal  loans)  as  well  as  stricter  retail  lending guidelines  introduced.  Meanwhile,  customer  deposits  declined  2.4% QoQ  (+1.7%  YTD),  resulting  in  a  higher  loan-to-deposit  ratio  (LDR)  of 108.1% (Jun  2014:  103.9%).  Gross impaired loans  (GIL)  ratio  improved 
slightly  QoQ  at  6.9%,  based  on  a  3-month  classification  criterion  (vs 3Q13: 8.4%, but based on a 6-month classification criterion). 

Briefing  highlights.  Management  revealed  that  its  corporate  business and wholesale banking  segment has  shown positive results.  For 3Q14, loan  approvals  for  the  segment  reached  MYR4.8bn  (2Q14:  MY2bn),while  disbursements  amounted  to  MYR1.7bn  and  loan  stock  stood  at MYR4.8bn.  MBSB added  80 new corporate depositors  in 3Q14,  raising total  number of  corporate depositors to  378.  The slight improvement  in MBSB’s net GIL ratio of 5% in 3Q14 (2Q14: 5.2%) was due to continued strengthening of  its  collection process helped by  the  Debt Consultation Campaign.  Moving  forward,  MBSB  expects  NIM  to  remain  under pressure due to tightening measures by Bank Negara. Management also updated  that  it  has  completed  the  groundwork  and  processes  to  close the  gaps  in  transforming  MBSB  into  a  full-fledged  banking  institution. Finally,  management  emphasised  that  MBSB  will  continue  to  leverage on its Biro Angkasa and AG code facilities. 

Source: RHB