MBSB expects to do better after impairment programme

PETALING JAYA: Malaysia Building Society Bhd (MBSB) expects to perform better financially only after the provisioning under the company’s loan impairment programme is completed.

The company embarked on the programme in recent years in order to restructure its books.

The lender’s cumulative net profit for the financial year ended Dec 31, 2016 (FY16) amounted to RM201.41mil, which was 21.8% lower, year on year (y-o-y), on the back of RM3.28bil in revenue.

“The impairment programme was to raise provisions for a total RM1.9bil between FY16 and FY17.

“Management has revised the target for total provisions to be made under the impairment programme from RM1.9bil to RM1.7bil.

“In FY17, we understand that a further provision for loan impairment of RM700mil will be made.

“Hence, significant improvement in earnings can only be expected after the impairment programme ends in FY17,” research house AmInvestment Bank stated.

Furthermore, according to AmInvestment, MBSB’s growth in gross loans slipped to 3.4% y-o-y in Q4FY16 compared to 4.6% y-o-y in the preceding quarter as its corporate and mortgage loans recorded a slower growth of 29.9% y-o-y and 0.7% y-o-y compared to the last quarter, while MBSB’s auto and personal financing loans recorded a decrease of 11.2% and 1.5% y-o-y compared to the last quarter.

“For 2016, MBSB saw a mediocre loan growth. Management guided that its target for 2017 will be to disburse additional financing totalling RM3.46bn in 2017, which includes for affordable housing projects.

“In order to mitigate credit risks in its books, MBSB will continue to diversify into asset-securitisation programmes, re-price its loans at higher rates and explore potential fee income,” Affin Hwang stated.

AmInvestment bank maintained their “hold” rating on MBSB with a target price of RM1.10 per share while Affin Hwang suggested a “sell” at a target price of RM0.78.

Meanwhile, Affin Hwang said a merger deal with Asian Finance Bank will be favourable to writebacks and recoveries of impaired loans, new business directions through product launches and a robust pipeline of undisbursed corporate financing amount of RM7.8bil.

MBSB closed one sen higher at RM1.16 yesterday.