MBSB still work in progress, has great potential

KUALA LUMPUR: Rakuten Trade remains positive on Malaysia Building Society Bhd (MBSB) despite the latter’s weak first-quarter performance due to higher provisions as it transitions into a full-fledged bank.

In a note, the research house said MBSB was still very much a work in progress with great potential for growth.

“MBSB was still in transition to a full-fledged bank after its acquisition of Asian Finance Bank last year,” it said.

“As such, MBSB was still a work in progress and is putting in place capabilities expanding delivery channel with digital footprint in investments in technology.”

Following the acquisition, MBSB is now the country’s second largest standalone Islamic bank, with assets amounting to RM45 billion and retail to corporate loans at the 74:26 ratio as at the first quarter.

Rakuten was also optimistic of MBSB’s position as beneficiary of the recent Overnight Policy Rate cut of 25 basis points to three per cent.

“Deposits growth in current account/saving accounts (CASA) was expected to accelerate with slew of products such cash management system, debit cards and Internet banking,” it said.

“While its net interest margins of above three per cent remained the highest among the banks, its cost-to-income ratio of 26.34 per cent was the lowest.”

Rakuten Trade has a “buy” call on the company’s shares, with a target price of RM1.31.

The building society turned bank last week reported a 73.5 per cent year-on-year fall in net profit to RM83.83 million for the first quarter of this year due to higher expected credit losses.