This article first appeared in The Edge Malaysia Weekly on August 12, 2024 - August 18, 2024
MBSB Bhd (KL:MBSB), the holding company of MBSB Bank Bhd and Malaysian Industrial Development Finance Bhd (MIDF) that was previously known as Malaysia Building Society Bhd, could see a change in its leadership structure. According to sources, MBSB group CEO Rafe Haneef may assume the role of CEO at MBSB Bank in addition to his current position.
This follows the departure of Datuk Nor Azam M Taib, the former CEO of MBSB Bank in June. He had joined MBSB in November 2010 and was appointed the CEO of its banking arm in July 2022. The position has been vacant since he stepped down.
It is understood that the financial group has submitted its application to Bank Negara Malaysia for approval. If approved, it will strengthen Rafe’s position as group CEO as he will also be the person overseeing the banking unit.
“Basically, the exercise would reduce a layer of hierarchy in the group. It is to increase operational efficiency and allow for faster decision-making at the MBSB Bank level,” a source tells The Edge.
Another source says, “It could improve efficiency within the organisation. There are not many changes that can be made at the holding company level.”
It is learnt that two other financial institutions have a similar structure, that is, they operate with a holding company, namely CIMB Group Holdings Bhd (KL:CIMB) and Hong Leong Financial Group Bhd (KL:HLFG).
When contacted, MBSB declined to comment on the possible change that may occur. “We will make the announcement when there is a new development.”
MBSB is currently the holding company of an enlarged banking group, with end-to-end banking services including consumer banking, commercial and small and medium enterprise (SME) banking, development finance, corporate banking, investment banking and asset management.
Rafe was appointed group CEO of MBSB in July last year amid the merger between MBSB and MIDF. Following his appointment, Nor Azam assumed the role of CEO of MBSB Bank.
A market observer says that after the completion of the merger between MBSB and MIDF, a lot of changes need to take place at the banking level and a flatter leadership structure would lead to increased collaboration and efficiency. “By flattening the organisational structure, it will be more efficient to embark on the post-merger
integration and future development of the bank,” he adds.
In June, MBSB announced a strategic three-year business plan called FLIGHT26, aimed at enhancing profitability. Under the plan, the group would seek to raise the proportion of its current account, savings account (CASA) to 20% from just 7% in 2023, as well as lift its gross financing to RM50 billion from RM42 billion. CASA typically carries little to no interest, hence it is lower in terms of cost of funds compared with fixed deposits.
Ultimately, the enlarged banking group aims to raise its return on equity (ROE) to 8% by end-2026. Last year, its ROE stood at 5.23%.
MBSB Bank completed its merger with MIDF in October last year, with the combined entity having total assets of RM66.66 billion at end-2023, making it the second largest standalone Islamic bank after Bank Islam Malaysia Bhd (KL:BIMB) (RM90.96 billion).
Following the merger with MIDF, MBSB Bank, which was predominantly a consumer bank, gained the investment banking and asset management businesses, as well as a larger SME portfolio.
In April last year, MBSB received regulatory and shareholders’ approval to buy MIDF from Permodalan Nasional Bhd for RM1.01 billion, which was satisfied by the issuance of 1.05 billion MBSB shares at 96.52 sen apiece. According to its circular, the offer price was a 53% premium to MBSB’s historical trading price of 64.5 sen per share.
MBSB, which used to be a non-bank lender, had transformed into a banking entity in 2018 following a merger with Asian Finance Bank Bhd (AFB). MBSB acquired AFB in a RM644.95 million deal that was settled via cash and the issuance of new shares. Following the merger, AFB undertook a rebranding exercise and changed its name to MBSB Bank on April 2, 2018.
For the first quarter ended March 31 (1QFY2024), MBSB posted a 5.6% year-on-year (y-o-y) jump in net profit to RM78.34 million, from RM74.13 million in the previous corresponding quarter, thanks to higher financing earnings and consolidation contribution from MIDF Group. The banking group’s financing earnings had expanded to RM42.9 billion from RM39.2 billion in 1QFY2023.
Revenue for 1QFY2024 was up 34.3% y-o-y to RM893.45 million from RM665.49 million. No dividend was declared for the quarter.
MBSB’s share price had risen 9.2% year to date to close at 78 sen last Friday, giving the group a market capitalisation of RM6.37 billion.
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