This article first appeared in The Edge Financial Daily on November 21, 2019

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB), announcing yesterday that its latest quarterly net profit expanded 39.5% year-on-year, said MBSB Bank Bhd is establishing a sukuk programme of up to RM10 billion in nominal value.

The Islamic note programme is set up under the syariah principle of Wakalah Bi Al-Istithmar for the issuance of senior sukuk, Tier-2 sukuk wakalah and Additional Tier-1 capital sukuk wakalah.

MBSB said the issuance of the said sukuk will provide MBSB Bank with senior funding for its general banking purposes.

Separately, it said the net profit’s leap to RM170.16 million for the third quarter ended Sept 30, 2019 (3QFY19) from RM121.96 million a year ago was mainly due to the reversal of overprovision of tax expenses. It also attributed the higher earnings to lower operating costs.

Its earnings per share, accordingly, expanded to 2.63 sen from 1.97 sen. Quarterly revenue was up 3.5% to RM813.92 million, from RM786.41 million, according to a filing with Bursa Malaysia yesterday.

The revenue was driven by its subsidiary MBSB Bank’s corporate financing income, treasury income and retail financing income.

Its net profit margin narrowed by 0.24 percentage point to 2.84% from 3.08% in 3QFY18, while its quarterly operating profit increased to RM265.72 million from RM231.42 million.

Nonetheless, the group’s return on equity, on the other hand, declined to 5.99% from 9.51% last year, while its return on assets fell to 1% from 1.53%.

Its cost-to-income ratio improved to 26.7% from 27.66%.

For the cumulative nine-month period, its net profit slid 31.3% to RM360.21 million or 5.58 sen per share from RM524.44 million or 8.58 sen per share last year. Revenue grew marginally by 0.84% to RM2.42 billion from RM2.4 billion.

Barring any unforeseen circumstances, the group’s prospects for the year are expected to be satisfactory, said MBSB.

The group continues to focus on expanding its corporate business, to reach the desired corporate retail portfolio mix, said MBSB.

The current financing composition ratio between retail and corporate stands at 72:28. MBSB’s target is to be at 60:40 by next year, said MBSB.

“As a new Islamic banking group in the industry, the group is looking forward to expanding its products and services which include trade finance, wealth management and Internet and mobile banking to cater to various segments of customers and depositors,” said the group.

“MBSB Bank will continue to look for opportunities in the digital banking sector and at the same time focus our strength on the small and medium enterprises segment,” said its group president and chief executive officer Datuk Seri Ahmad Zaini Othman in a separate statement yesterday.

He also said the bank is progressing towards completing its three-year digital transformation plan — to be achieved before 2021.

MBSB shares closed unchanged at 85 sen yesterday, valuing them at RM5.71 billion.