KUALA LUMPUR: Asian Finance Bank Bhd (AFB), an Islamic bank backed by a consortium of leading Middle-Eastern financial institutions, saw its highest net profit of RM14.98 million for its financial year ended Dec 31, 2014 (FY14) — almost double the RM7.57 million in FY13 — since setting up shop in Malaysia eight years ago.

AFB chief executive officer Datuk Mohamed Azahari Kamil said the group’s stellar performance was due to its financing assets, which grew 5.38% to RM1.74 billion in FY14 from RM1.65 billion in FY13.

He said the group’s business model of providing funding to government-linked companies and public-listed corporations that have business dealings with the government, which makes up 94% of its financing portfolio, has also proven to be a recipe for success.

“This year (FY15), due to tough economic conditions and the weakening ringgit, we are targeting 5% financing assets growth,” he told reporters after announcing the group’s FY14 results yesterday.

AFB’s securities assets, which  grew 17.29% to RM819 million in FY14 from RM698 million in FY13, also contributed to its FY14 bottom line.

“Our asset quality has improved ... we recorded a lower-than-industry figure for both gross and net non-performing financing ratio at 0.74% and 0.17%, respectively, in FY14, with a financing loss reserve ratio of 167.2%,” said Mohamed Azahari.

According to data from the central bank, the industry’s gross and net non-performing financing ratios stood at 1.64% and 1.2%, respectively, as at Dec 31, 2014.

The group’s total income rose 10.6% to RM129.61 million in FY14 from RM117.18 million in FY13, while its profit paid to depositors increased 16.34% to RM76.53 million in FY14 from RM65.78 million previously.

In terms of efficiency, AFB’s cost-to-net-income ratio improved to 56.91% in FY14 from 65.26% in FY13, with overheads savings improving 9.96% to RM30.21 million in FY14 from RM33.55 million in FY13.

The group is targeting a return on equity (ROE) of 8%-10% in 2-3 years. Its ROE as at March 2015 stood at 4.15%.

Its largest shareholder is Qatar Islamic Bank and associates (66.7%), followed by RUSD Investment Bank Inc of Saudi Arabia (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain WLL (6.67%).

“We hope our performance erases the perception that Middle East-owned financial institutions in Malaysia are not doing well as we have turned around our operations from a loss-making position in 2012.

“Our services are niche in that besides offering financing, we offer our customers an opportunity to expand their businesses into the Middle East, and also other markets in the Asean region” said Mohamed Azahari.

AFB currently has two branches in Malaysia, one in Kuala Lumpur and the other in Johor Baru. It does not intend to open more branches as it wants to focus on corporate banking rather than retail.

“What we are looking at now is increasing our fee-based income from existing and new customers by providing corporate advisory services, such as investment banking,” he added.

This article first appeared in The Edge Financial Daily, on July 15, 2015.