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KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) expects the recent reduction of the Overnight Policy Rate (OPR) to have an immediate positive impact on its third-quarter results ending September 30.

 In an interview with Business Times, president and chief executive officer Datuk Ahmad Zaini Othman said the current quarter would most likely yield better results than the second quarter.

MBSB posted a lower year-on-year net profit of RM63 million in the second quarter ended June 30 due to higher allowance for impairment losses on loans, advances and financing.

“It (the Bank Negara Malaysia’s OPR reduction by 25 basis points) has impacted us in a positive way as most of our retail loans are on a non-fixed rate. That would give us a slightly better net interest margin versus the fixed rates. We can probably see the positive impact come the third quarter.”

Zaini said in the best-case
scenario, MBSB’s income level would be more stabilised in the third and fourth quarters as it continued to build up its corporate loan book.

“It should be noted that even as we enlarge our loan books, especially in the corporate side, the full realised income will only come in later. This is just the nature of the business as corporate loan disbursement is done on a staggered basis, unlike retail loans which are easier to project.”

MBSB is in the process of disbursing some RM6 billion corporate loans. But this, according to Zaini, would not be reflected in this year’s financial results as “corporate loan disbursements take time”.

In light of the challenging environment, MBSB has revised downwards its loans growth target this year to between four and five per cent from six to eight per cent.

“We have scaled down our personal financing programmes and are concentrating more on corporate business. We are pleased to say the division has grown. In fact, this quarter alone, it has grown some eight per cent.

“Personal financing, however, remains a challenge and that’s why we have reduced our total loans growth projection to about four to five per cent year-on-year.”

Zaini said the retail financing space remained competitive, thus making it difficult for MBSB given its limitations as a non-bank lender.

MBSB is looking to pare down its retail presence over the long term.

“In terms of the retail and corporate ratio contribution to bottom line, it is about 85:15. We are looking to pare it down to 30:70 by 2020, and over the next 15 years or so, we would want to cater to corporates exclusively,” said Zaini.

This would be done by nurturing relationships with existing clients, and acquiring new, profitable ones.

“At the end of the day, our principal activities are mostly property related, so we are looking at prospective clients who are in the property segment with attractive landbank and proven track record.

“One of the things that we are very much involved in is the 1Malaysia Civil Servants Housing Programme, of which we have already approved nearly RM2 billion. The affordable housing space is where we want to play a bigger role,” he said.

Its approved contract financing for  the 1Malaysia People’s Housing Programme stands at RM1.41 billion as of June 30.

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