Chairman's Review

as appeared in Annual Report 2016

YBhg Tan Sri Abdul Halim bin Ali

OVERALL BUSINESS ENVIRONMENT

The year 2016 was another challenging year in wake of the unsettled economic and political strains both globally and domestically. Given the uncertainties, it has been an arduous operating environment for MBSB. Margins remains under pressure coupled with increasing regulatory requirements and strained operating costs.

Notwithstanding these challenges, MBSB continue to persevere. Business growth remained intact with gross loans and financing registering at RM35.28 billion for the FYE 2016 a slight growth of 3.45% year-on-year. A profit before tax of RM338.42 million was achieved for the FYE 2016 against a profit before tax of RM355.03 million which was achieved in the previous financial year. The slight variance of 4.68% or RM16.61 million was due to the higher allowances for impairment losses on loans, advances and financing.

In July 2016, MBSB successfully raised RM1.71 billion via a 2 Call Rights Issue exercise in line with our strategy to strengthen our core capital and to increase the leverage ratio to at least 12.5% in compliance with Bank Negara Malaysia’s (“BNM”) requirement. The 2 Call Rights Issue was oversubscribed by 9.13%, reflecting our shareholder’s confidence in MBSB’s future prospects.

Although MBSB had on 2 February 2016, announced the termination of the discussions with DRB-HICOM Berhad and Khazanah Nasional Berhad for the proposed merger with Bank Muamalat Malaysia Berhad, the Management continue to pursue options to enable MBSB to expand beyond the current operating model.

On 21 December 2016, MBSB announced that consent was obtained from BNM, to commence negotiations with the shareholders of Asian Finance Bank Berhad (“AFB”) for the proposed merger of MBSB and AFB. BNM had given MBSB a period of 6 months from 21 December 2016 to complete the negotiations. Negotiations are currently on-going and the outcome would be announced accordingly.

OUTLOOK

Irrespective of the outcome of the negotiations, going forward, we expect the year to remain challenging. The global economic environment is expected to be more constrained, directly impacting the Malaysian economy. A 4.5% growth in GDP is expected in view of current forecasts of fluctuations in crude oil prices, volatile Malaysian Ringgit against currencies of Malaysia’s major trading partners and increase in the cost of living.

Total loans growth is anticipated to slow down further this year, due to weaker consumer sentiments.

Amidst these concerns, we plan to implement MBSB Business Plan for 2017 which will be more selective in certain segments in order to achieve sustainable and healthy asset growth. We will also enhance risk and compliance frameworks further and make improvements in operational efficiency. These efforts are important to preserve the Company’s value in view of the demanding environment.

The Board has proposed that a final single tier dividend of 3% amounting to approximately RM173.96 million to be paid, subject to the shareholders’ approval at the forthcoming Annual General Meeting.

AWARDS AND RECOGNITIONS

We are proud that our commitment to continuously deliver value to all stakeholders received stellar recognitions. In 2016, MBSB was credited with several awards and accolades. They include;

  • 3rd IBFIM Certifications Awards Ceremony for IBFIM’s Islamic Finance Talent Development
  • The Alpha Southeast Asia 10th Annual Best Deal & Solution Awards for Best Secondary Deal of The Year 2016 in South East Asia
  • HR Asia Awards Best Companies to Work For in Asia 2016
  • Malaysia HR Awards 2016 for Employer of Choice, Bronze Award

ACKNOWLEDGEMENT

Before I conclude, I would like, on behalf of our Board, take this opportunity, extend our sincere appreciation to all our shareholders, customers and business partners for their continued confidence and support extended to MBSB.

I would also like to take this opportunity to thank Cik Ravinder Kaur for her services as Board member and also Dr. Sa’adan bin Man for his Shariah Advisory Committee member, throughout their tenure with MBSB.

I also extend a warm welcome to Encik Sazaliza bin Zainuddin, Datuk Johar bin Che Mat and Puan Lynette Yeow Su-Yin who have just joined MBSB in 2017. Their experience in their own areas of expertise will greatly benefit MBSB as we progress towards the aspiration to move beyond the current operating environment and Propelling MBSB Further and Beyond… Solidifying the Future.

Further, my deepest gratitude also goes to my fellow Board members, the Shariah Advisory Committee and our dedicated management and employees who have continuously remained steadfast in taking MBSB to greater heights.

Thank you.

Tan Sri Abdul Halim bin Ali
Chairman

22 March 2017