KUALA LUMPUR (May 24): Malaysia Building Society Bhd's (MBSB) net profit in the first quarter ended March 31, 2017 (1QFY17) nearly tripled to RM101.32 million from RM34.84 million a year ago, thanks to higher gross loans and lower cost of funds.

The non-bank financial institution's quarterly revenue came in nearly flat in 1QFY17, a marginal 0.17% drop to RM811.2 million from RM812.63 million a year ago, due mainly to lower financing income from retail segment and lower income from investments in liquid assets.

"Despite the challenging economic conditions, we managed to achieve commendable profit after tax and maintain high operating efficiencies as reflected by our cost-to-income ratio," MBSB president and chief executive officer Datuk Seri Ahmad Zaini Othman said in a statement accompanying the group's earnings announcement this evening.

MBSB said its cost-to-income ratio has improved to 19.72% in 1QFY17 from 22.15% previously, which was "considerably better than the industry's average of 49.5%".

MBSB pointed out that its higher quarterly earnings was due to lower allowances for impairment losses on loans, advances and financing, as it continued its asset impairment programme initiated since 4QFY14.

This had resulted in MBSB's return on equity — a measure of profitability — increasing to 5.98%, while its assets impairment programme had resulted in better non-performing loan (NPL) ratio of 2.76%.

On this, Ahmad Zaini said, "We are definitely pleased that the NPL continued to show a positive trend, which is mainly due to our efforts in early detection and effective monitoring of accounts."

According to MBSB, the asset impairment programme was part of its "Closing the Gaps" exercise that it had embarked on since 2010 to bridge its frameworks to be in line with banking standards and best practices.

The impairment programme, which is in line with the recommendation by Bank Negara Malaysia, is in addition to the existing impairment provision that is in compliance with current accounting standards.

On its business performance, MBSB said its gross loans and financing grew by 4.07% year-on-year (y-o-y) to RM35.85 billion, mainly contributed by higher corporate financing disbursements but partly set off by a slight contraction in the retail base.

The financial firm noted that its corporate business' strategic business expansions in the sector had increased its asset composition between retail and corporate to 80:20, as compared to 84:16 y-o-y, steadily progressing towards the group's target of 70:30.

On prospects, MBSB said it will focus on continued expansion of its corporate business segment as it has shown positive contribution in 1QFY17.

"We shall continue to strengthen our market position in financing government contracts and projects especially in the affordable housing segment as well as the SME which has shown continued resilience," Ahmad Zaini added.

MBSB shares closed one sen or 0.78% lower at RM1.27 today, for a market capitalisation of RM7.36 billion. The stock has gained 41% year to date.