MBSB BERHAD
KLSE (MYR): MBSB (1171)
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Ride The Bull Short The Bear
CS Tan
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Celine Loo
53 posts
Posted by Celine Loo > 2016-11-22 08:51 | Report Abuse
PETALING JAYA: After two failed merger attempts, Malaysia Building Society Bhd (MBSB) is rumoured to be in merger and acquisition talks again, this time with Asian Finance Bank Bhd (AFB), sources say.
AFB is one of the three stand-alone Middle Eastern-based Islamic banks operating in Malaysia.
“There is interest and parties from both sides are said to be waiting for the central bank’s green light to begin negotiations officially,” said a banking source.
“However, the challenge would be meeting the demands of AFB’s diverse shareholders,” noted a banker.
It is known in banking circles that some of AFB’s shareholders are looking to exit and the bank was reportedly in talks for their stakes to be acquired by Malaysian Industrial Development Finance Bhd earlier this year. But the corporate exercise did not materialise, according to banking sources.
AFB is backed by a consortium of shareholders, namely, Qatar Islamic Bank (QIB) with the largest stake at 66.67%, followed by Saudi Arabia’s RUSD Investment Bank (16.67%), Yemen’s Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain WLL (6.67%).
Notably, the bank has not appointed a chief executive officer since the retirement of its previous head honcho Datuk Mohamed Azahari Mohamed Kamil in January this year based on its website – signalling a “transitory period” that could lead to the likelihood of changes in shareholding at the bank.
The bank is currently managed by an Interim Management Committee, which is chaired by treasurer Azidy Daud.
With a capital base of RM532.5mil and assets totalling RM2.62bil, it is the smallest Middle Eastern bank in the country after Kuwait Finance House (M) Bhd and Saudi Arabia’s Al Rajhi Banking & Investment Corp (M) Bhd. AFB has two branches, one in Kuala Lumpur and the other in Johor Baru.
It was mostly loss-making since 2007 before turning around in financial year 2013 after switching its business model to the more stable corporate funding as opposed to small- and medium-sized enterprises previously. The bank made a net profit of RM1.54mil for the second quarter ended June 30, 2016.
The future of Middle Eastern banks in the country has come into focus in recent years because of their paltry returns as fierce competition erodes margins.
In 2014, StarBiz had reported that Qatar-based QIB was looking to divest its strategic stake in AFB. QIB was first linked to the talk that it was seeking to exit a few years ago when Bank Negara mooted the development of a mega-Islamic bank. AFB was said to be a likely candidate for the licence, but that idea did not take off.
MBSB, meanwhile, has been trying to transform into an Islamic bank in one way or another to increase its competitiveness.
In February this year, the non-bank lender aborted its proposed merger with Bank Muamalat Malaysia Bhd, reportedly due to disagreements over valuation and control.
Prior to that, MBSB was part of a failed three-way merger with CIMB Group Holdings Bhd and RHB Capital Bhd that was called off in January last year amid falling oil prices.
Without a merger partner, the company can still grow on its own, albeit at a slower pace.
MBSB’s single-largest shareholder is the Employees Provident Fund (EPF) with a 65.4% stake.
EPF chief executive officer Datuk Shahril Ridza Ridzuan recently said that the non-bank financial provider was working with Bank Negara to revamp to bring it up to bank standards and was looking at a solution towards entering the mainstream market.
The fund injected RM1.3bil into the company to subscribe to its portion of the company’s rights issue in March to raise up to RM2bil to strengthen its core capital and increase its leverage ratio to at least 12.5%, in compliance with regulatory requirements hoping to secure a banking licence in the next two or three years.
The other substantial shareholder in the company is Tan Sri Chua Ma Yu, whose stake is now 8.97% from 6.06% through subscription of the rights issue.
The seasoned investor emerged as a substantial shareholder in MBSB in March this year.
MBSB, which has assets totalling RM42.57bil, has a strategic focus to increase its corporate loans/financing segment.
In the second quarter ended June 30, it posted a lower net profit of RM63mil, down 26.3% from a year ago due to a higher allowance for impairment losses on loans, advances and financing.
Corporate loans accounted for 16.9% of total loans as at that period, while personal financing was at 66.2% of its loan book and mortgage financing at 15.7%.
Its shares are down 32.91% year-to-date. The stock ended yesterday at 91.5 sen, up 15 sen with 3.58 million shares being done. At this level, it is trading at a price-to-book value of 0.53 times.