This article first appeared in The Edge Financial Daily on May 16, 2019
KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) reported a 73.5% fall in net profit for the first quarter ended March 31, 2019 (1QFY19) to RM83.83 million from RM316.79 million a year ago, due to higher expected credit losses (ECL).
This brought earnings per share for the quarter down to 1.31 sen from 5.33 sen previously, MBSB’s stock exchange filing yesterday showed.
Revenue for 1QFY19 declined 3.8% to RM784.04 million from RM815.04 million a year ago.
The increase in ECL was mainly because a write-back was recorded for 1QFY18 as a result of staging an improvement from Stage 2 to Stage 1, MBSB said. According to the bank, financial assets with a 12-month ECL are recognised to be in Stage 1, while those which are considered to have had a significant increase in credit risk are in Stage 2, and those for which there is objective evidence of impairment and are considered impaired are in Stage 3. Meanwhile, it said its cost-to-income ratio for 1QFY19 improved slightly to 26.3% from 26.7% for 1QFY18, well below the industry’s average of 48.6%.
“Despite the ongoing challenges, including the impact of higher expected credit losses, we registered stable growth in revenue, net operating income and a cost-to-income ratio of 26.34% which is below the industry’s average,” said group president and chief executive officer Datuk Seri Ahmad Zaini Othman in a separate statement.
On its 2019 outlook, Ahmad Zaini said while the Malaysian economic condition stays challenging, the group will remain focused on expanding its banking capabilities. “With this, the bank’s technology transformation shall continue to be in the centre stage. On another front, we also aim at increasing our fee income-based activities to make up 35% of income by [the] end of 2020.”
Barring any unforeseen circumstances, the group expects its prospects for the year to be satisfactory.
MBSB shares fell two sen or 2.06% to close at 95 sen yesterday, giving it a market value of RM6.07 billion.