MBSB, whose net income dived 75 per cent last year, has already called off discussions with Bank Muamalat, CIMB Group Holding Berhad and RHB Capital.
MBSB’s CEO Ahmad Zaini Othman said in an interview on Monday that his Kuala Lumpur-based company sees more room for growth in Islamic services and has abandoned conventional loans. “About 85 per cent of MBSB’s outstanding loans are already Shariah-compliant and credit growth this year should be around 6 to 8 per cent.”
“The company isn’t looking at any other mergers. It will maintain its focus on government contracts, particularly in the affordable housing sector.”
The company’s medium-term plan, according to Zaini, was sustaining asset growth, while maintaining low operational costs. “Product innovation shall be our medium-term plan.”
The figures compiled by Bloomberg on MBSB show that the yield on its sukuk due in December 2021 fell 10 basis points this year to 4.83 per cent. The company doesn’t have any plans to sell more debt at this point, conceded Zaini. “The company is planning to raise RM2 billion from a rights issue.”
MBSB, the figures show, had RM34.1 billion in outstanding loans at the end of last year and RM41.1 billion in assets.
Bloomberg quoted Badlisyah Abdul Ghani, President of the Chartered Institute of Islamic Finance Professionals in Kuala Lumpur and the former CEO of CIMB Islamic Bank Bhd, as claiming that “people are not only wanting banks to provide Islamic products but are demanding them.”
“So, MBSB’s plan is not surprising as many see Islamic finance as the way forward.”
Former Asian Finance Bhd’s CEO Mohamad Azahari Kamil, now President of SEGI University & Colleges in Selangor, added that “MBSB is making the right move as it already has the Islamic infrastructure in place.”
“There’s still a lot of potential for MBSB to be involved in retail and corporate Syariah financing.”
MBSB is 65 per cent owned by the Employees Provident Fund (EPF). Its share price fell 39 per cent to RM1.34 over the past year. It’s net income dropped to RM256.7 million from RM1.02 billion in 2014. The company explained, in a filing with the Kuala Lumpur Stock Exchange, that “the losses were due to higher allowances for impairment losses on loans”.
Malaysia, which pioneered Shariah finance in the 1980s, has set a target of 40 per cent of its banking assets by 2020 to comply with the religion’s ban on interest. It was 26.8 per cent last year.
Ernst & Young predicts that the “industry’s worldwide assets will double to USD3.4 trillion in 2018 from 2013.”