Chairman's Review
(as appeared in Annual Report 2011)
Dear Shareholders,
On behalf of the Board of Directors (Board) of Malaysia
Building Society Berhad (MBSB), it gives me great pleasure
to present the Annual Report and Audited Financial
Statements for the twelve (12) months of financial year
ended 31 December 2011 (FY2010/2011).
Overall Business Environment
Inspite of the global economic uncertainties due to the Eurozone crisis, economic slowdown in the US, inflationary pressures resulting from rising commodity prices, the impact of the earthquake in Japan and the political turmoil in the Middle East, the Malaysian economy managed to grow at a steady but moderate rate of 5.1% for the whole of 2011. The economy responded positively to the government's various economic and political transformation programmes. In the first half of 2011, Foreign Direct Investments (FDI) grew by 75% to RM21.2 billion compared to RM12.1 billion for the same period in 2010. In this environment, our commitment to enhance shareholder value remained strong, successfully delivering strong financial results for our company by focussing on new growth areas.
Review of Financial Performance
In view of the steady economic growth, Malaysia's financial industry recorded a total loans growth of 13.6% for 2011. Taking advantage of the healthy developments in the financial service areas we operated in, MBSB managed to upstage the industry's performance with net loans and advances growth of RM15.2 billion, an increase of 42% as compared to the same period in 2010. This accomplishment was predominantly led by MBSB's Personal Financing-i (PF-i) scheme to government servants and staff of government related agencies.
Pre-tax profit attributable to shareholders amounting to RM428 million, was a stellar increase of 107% over the previous year in 2010. In turn our assets also rose to RM17.36 billion, 42% up on the previous year. Our non-interest income increased from RM91 million to RM160 million for 2011. Overall, these results contributed to MBSB's improved net earnings per share of 32.43 sen and return on equity to 43% for 2011.
As of 31 December 2011, total deposits from corporate and retail clients stood at RM13.5 billion, an increase of 29% from RM10.5 billion for 2010.
In order to strengthen our financial base and sustain asset growth, we also undertook alternative fund raising exercises during the year.
In line with the dynamic nature of the financial industry, it is also our aim to improve MBSB's operational efficiency and turnaround times. In accordance with this objective, we took every effort to improve customer service, open new branches and upgrade branches nationwide and increase staff strength in much needed departments, in particular marketing.
Corporate Social Responsibility (CSR)
Since our beginning more than 60 years ago, we have been carrying out numerous charity projects especially in the areas of education for the society.
Last year was no different. In 2011 we continued with the implementation of the "PINTAR School Adoption Program" by increasing the number of schools adopted from two to six. These schools were selected from six business regions as administered by our Regional Business Representatives (RBR).
We also participated in a new program called "Program Sejahtera" last year, aimed at improving the living conditions of disadvantaged families nationwide and alleviating their suffering and financial burden through contributions to mainly single mothers, orphans and the disabled.
While the community we serve is important to us, we have not forgotten our valued asset - our staff. Many of our most deserving employees have benefited from the internal CSR programmes by way of financial aid and incentives for the advancement of their children's education.
Dividends
Given the robust results achieved in 2011, the Board has declared a gross interim dividend of 5% less 25% income tax in September 2011 and is now proposing a final gross dividend of 7% less 25% income tax.
The total net dividend represents about 34% pay-out of the profit after tax.
Prospects
In 2012, the global economic environment is set to be more constrained and challenging. The International Monetary Fund has revised both the world economic growth and world trade downwards to 3.3% and 3.8% respectively. This is bound to have a direct impact on the Malaysian economy.
Although the economic and political transformation programmes have been set in motion and domestic demand is expected to play an increasing role in our economy, total loans growth is anticipated to slow down this year due to weaker consumer sentiments.
Regardless of these potential downsides, MBSB will remain focused on its strategies to boost loan expansion and sustain revenue streams. This will be achieved via asset portfolio diversification and increasing our fee-based income.
In line with Bank Negara Malaysia's (BNM) latest credit guidelines on retail borrowings, I am pleased to report that we have already begun to observe the "closing gap" approach, effective late 2010. This has shown a marked improvement in the way we undertake our business. Essentially, it is a process that aims to standardise our business and operational practices in accordance with the guidelines of a licensed financial institution. We will continue to pursue this process as part of the "Taking MBSB to the Next Level" transformation program.
Accolades
2011 was an outstanding year for MBSB, securing several recognitions for the success we had achieved.
For instance, after reaching the RM1 billion mark in market capitalization at the end of 2010, MBSB was admitted into the prestigious The Edge Billion Ringgit Club, and was awarded "The Best Performing Stock" and "Highest Profit Growth Company" for 2011 under the financial sector class.
In recognition of MBSB's commitment to creating sustainable value and economic returns, the company was accorded second place in the financial services sector category of the KPMG Shareholder Value Award.
In addition, MBSB continued to be listed as one of the Top 100 Public Listed Companies for 2011 under the Minority Shareholders Watchdog Group (MSWG) Malaysian Corporate Governance Index (MCG).
It also received Special Mention by the MSWG for being an "A" rated company.
We are proud of all these acknowledgements which have greatly inspired us to strive for greater excellence. Our challenge now is to maintain these standards, if not outperform them.
Acknowledgements
MBSB has come a long way since its inception in 1950. Substantial credit for the success achieved over the last 60 years must be given to all our stakeholders. Indeed the remarkable performance for 2011 was the culmination and support from all our customers, shareholders and exceptional efforts of the loyal employees nationwide.
My utmost gratitude also goes to my colleagues on the Board and members of the Shariah Advisory Council for their deep insights, wisdom and guidance in helping to steer MBSB on a steady course.
Tan Sri Abdul Halim bin Ali
Chairman
15 February 2012