MBSB done with clean-up

Lender says it can enjoy write-backs after disposal of RM600mil legacy bad loans

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB), which has been writing down its bad loans which it claims were legacy lending for more than two years, has finally cleared its books.

The former non-bank lender, which became a full-fledged bank after a merger with Asian Finance Bank Bhd, said that a chunk of RM600mil worth of “hardcore” bad debts would be disposed of by the end of this year.

President and chief executive officer Datuk Seri Ahmad Zaini Othman said that the disposal of the RM600mil tranche of non-performing loans (NPLs), which are legacy loans, would effectively conclude the exercise of cleaning up its books.

“These are hardcore distressed assets to the tune of about RM600mil and this will basically conclude our whole (impairment) programme. We have already provided for it and the sale of the bad debts would allow us to write back some portions,” he told a press conference after its AGM here yesterday.

Ahmad Zaini said that post-disposal, MBSB’s NPL ratio would be reduced to be closer to the industry benchmark.

Most of the legacy NPLs are facilities such as personal financing and mortgages. The assets backing the loans have been disposed of and the debt left is the shortfall.

“We just have to get rid of these things and these have already been provided for,” Ahmad Zaini added.

Following the sale of the RM600mil of legacy bad debts, MBSB’s gross NPL ratio would be below the current 4%.

MBSB had embarked on a programme to write off its “legacy” bad debts on a quarterly basis in 2016 and the exercise ended in 2017.

In its first quarter to end-March, MBSB posted a net profit of RM316.79mil, a jump of more than 200%. It said the improved results were partly due to the write-back of RM154mil on the allowance for impairment losses of the financing assets.

“This follows the implementation of MFRS 9 effective Jan 1, hence indicating that we had actually undertaken a highly prudent impairment programme,” Ahmad Zaini said.

MBSB was given the banking licence on the premise of it being a full-fledged Islamic bank.

Towards this end, the bank would soon convert the remaining 10% of assets that are conventional loans to Islamic assets.

“What Bank Negara has informed us is that we have got three years to put everything under Islamic (assets). As far as the group is concerned, we are only undertaking Islamic lending activities. We will gradually either selldown or convert the conventional assets.

“Technically, the whole group will become Islamic. If we can’t make it within the three years, we have to inform Bank Negara,” he said.

On MBSB’s outlook, Ahmad Zaini said the group is targeting a loans growth of about 3% to 5% for 2018.

“As long as we are aware of the situation surrounding the country – the RM1 trillion debt issue we can work around it. Some areas such as affordable homes ... some of these segments in the property sector should remain quite stable and strong.

“Things like oversupply of property in the commercial side remain the same,” he said.

“For MBSB, we are looking at opportunities in transactional banking such as trading,” he added.

On its business plan for 2018, Ahmad Zaini said that MBSB Bank would be working on a three-year business plan that comprises 22 key initiatives that would be implemented up to April 2019.

“It will be in three main phases that focus on growing the current business, empowering the business, as well as penetrating new markets. MBSB Bank will also look into introducing a host of new banking products and expanding customer reach,” he said.

MBSB’s shares ended the day unchanged at RM1.16, with 1.73 million shares worth RM2.02mil changing hands.