KUALA LUMPUR (Aug 27): MBSB Bhd (KL:MBSB) cut key targets after reporting that its net profit more than halved in the second quarter as financing income fell and expenses rose.

The company, which also owns a full-fledged Islamic banking subsidiary, cut its 2026 guidance for return on equity to 2%-3% from 5%-6% previously. Net profit margin from funding activities, meanwhile, is expected to come in at 1.6% this year instead of 2%.

MBSB, nevertheless, highlighted quarter-on-quarter earnings improvement that demonstrates continued business strength, supporting a positive earnings outlook in the coming quarters.

“Building on the progress achieved to date, the group will continue to strengthen its digital capabilities, introduce customer-centric solutions and enhance service delivery while maintaining prudent risk management and capital discipline,” MBSB added.

Net profit for the three months ended June 30, 2026 (2QFY2026) was RM44.22 million compared to RM95.56 million a year earlier. Year-on-year, net funded income fell 24% to RM272.5 million while other operating income, including fees and trading gains, was up 17% to RM73 million.

The company, which also holds MBSB Investment Bank Bhd and Malaysian Industrial Development Finance Bhd, achieved return-on-equity of only 1.5% in the second quarter. Net profit margin from funding activities was 1.6%.

An interim dividend per share of 0.86 sen was declared, down from two sen in the same quarter last year.

For the first six months, net profit totalled RM74.36 million, a 59% decline from the same period last year as net income declined and provisions on loans, financing and advances and other impairment surged.

Net financing and advances grew 6.7% while deposits from customers expanded 6.5%.

Shares of MBSB were down one sen or 1.6% at 61 sen, valuing the group at RM5.02 billion ahead of the results announcement.