Malaysia Building Society ready to be a bank

PETALING JAYA: The Malaysia Building Society Bhd (MBSB) hints that it is ready to be a bank, noting that its latest rights issue to strengthen its capital base is a major step in that direction.

When asked if the financial provider was ready to assume a banking position, president and chief executive officer Datuk Ahmad Zaini Othman said the injection of RM1.47bil capital signals MBSB’s ability to move forward to be a bank.

“The rights issue and support from the shareholders are a big step to becoming a full-fledged bank,” he told reporters after the EGM, “In terms of banking capital requirements, they are all there.”

He added that the group had been closing the gap between its organistion’s structure and a bank’s in the past few years, putting in place policies, procedures and systems that would make MBSB behave and look like a bank.

Zaini added that Ernst & Young had been looking at its proposition and MBSB had also kept Bank Negara in the loop of its progress.

“The two options always been there – to go on our own or by way of major merger and acquisition (M&A) – and it is up to the shareholders to decide which is the most optimal option,” he said.

“Hopefully, next year there will be something,” he said, hinting on a consolidation or M&A.

“Any form of M&A is good for us. We’ve been lending for over 60 years, so what more can do we now. Either you close shop or you move into a structured environment,” he said.

Zaini added: “So much growth in the past four years is based on business as usual – personal financing, home mortgages and pockets of corporate business – but the banking world is bigger than that. We don’t have access to trade finance, forex, money markets.

When asked if MBSB saw value in merging with RHB, he said any form of integration with any financial institutions would be good for MBSB. MBSB clarified that it was not applying for a banking licence.

MBSB also target 15% of increase in revenue in 2014, as it balanced its portfolio between retail and corporate businesses.

At the moment, the financial provider’s operations have a 75:25 retail to corporate ratio. The group intends to balance it to 60:40 next year, and 55:45 in 2015.

For the corporate segment, it target a 15% to 20% increase in loan growth in 2014.

In its nine-month ended Sept 30 results, MBSB’s revenue rose to RM1.82bil from RM1.34bil, buoyed by its retail business although Zaini said the segment registered slower growth.

The three resolutions set out in the EGM were resolved, allowing the financial provider to proceed with its rights issue exercise to raise RM1.47bil, its dividend reinvestment plan (DRP) as well as its acquisition of office development from PJ Sentral Development Sdn Bhd.

The rights issue involve the issuance of up to 889.80 million rights shares at RM1.65 each.

The funds raised was to strengthen MBSB’s capital base while the DRP will allow shareholders the option to elect and reinvest their dividend entitlements in new MBSB shares. The proposed building, to be acquired and developed for a cash consideration of RM239mil, will be MBSB’s new office in three years.

Zaini said there would be no major capex in 2014, apart from the building acquisition.