The Edge Billion Ringgit Club - Malaysia Building Society Bhd

The origins of Malaysia Building Society Bhd (MBSB) can be traced
back to the Federal and Colonial Building Society Ltd, incorporated in
1950. In 1956, it changed its name to Malaya Borneo Building Society Ltd
(MBBS), with the Malayan government as its major shareholder. MBBS was
then listed on the Stock Exchange of Malaysia and Singapore in 1963.



Source From (The Edge Malaysia): http://www.theedgemalaysia.com./in-the-financial-daily/197346-the-edge-billion-ringgit-club-malaysia-building-society-bhd.html
Tuesday, 06 December 2011 11:15

MBSB
was incorporated in 1970 to take over the Malaysian operations and was
listed on the then Kuala Lumpur Stock Exchange in 1972. MBSB is a
scheduled institution as defined under the Banking and Financial
Institution Act 1989 (Bafia). It was granted exempt finance company
status in 1972 by the finance ministry and the status has remained in
force since.

Employees Provident Fund Board and Permodalan
Nasional Bhd are two major shareholders of MBSB. As a financial
provider, MBSB offers a spectrum of innovative financial products and
services for both individuals and corporates throughout its branches
nationwide.

CEO Datuk Ahmad Zaini Othman shares with The Edge
Financial Daily his strategies and dreams for the company, and the
transformation he has led MBSB through since taking over the helm in
early 2009.

TEFD: What are the company’s competitive strengths and advantages?
Zaini:
MBSB is an exempt finance company granted by the finance ministry on
March 1, 1972. This allows MBSB to undertake a financing business in the
absence of a banking licence. As a result of this, it is not subjected
to Bafia and is limited in its ability to provide a comprehensive range
of financial products and services in comparison to its licensed peers.

Nevertheless, it does possess certain strengths and advantages to continue providing promising returns to its shareholders.

MBSB
has an established position in the market as a financial provider that
is preferred by the government servants. As a small financial
institution, we have great flexibility and agility in product
development and the decision-making process.


We are able to leverage on proven outsourcing partners to maintain a
low cost-to-income ratio. We have the ability to develop strategic
business collaborations with both financial and non-financial
institutions to create income-earning opportunities. Lastly, MBSB is a
single entity offering both conventional and Islamic banking products.

What have been the major achievements of the company in the past four years?
We
have achieved record profitability for two consecutive years, with
pre-tax profit of RM80.3 million in 2009 and RM207.4 million in 2010.

(Editor’s note: MBSB has since chalked up pre-tax profit of RM327.1 million for the nine months to Sept 30, 2011).

As
far as non-financial achievements are concerned, MBSB is the only
financial institution with a network of representative offices (REP)
compared to conventional full-fledged branches which require higher
capital expenditure. Our first REP was set up in 2010.

MBSB is
also the only financial institution to possess qualified project experts
such as engineers, property valuers and quantity surveyors. They are
housed under the project management and monitoring department, which has
also been ISO 9001:2008 certified.

In terms of corporate governance, we were ranked 34th under the Malaysian Corporate Governance Index 2010. What
are the major challenges your company faced over the years and how did
it overcome them? Is there anything else you would have done
differently?
As a non-bank financial institution, we have
several challenges. These include effectively competing with existing
market players that are superior in terms of funding costs, asset size,
branch network and infrastructure. We are also constrained in our
ability to extend our reach to customers due to a limited branch
network.

Due to our new business direction, we need the talent
and skills required to execute new business initiatives. We are also
constrained by the inability to provide trade facilities for corporate
clientele. Lastly, there are also various misconceptions of the company
due to past issues and legacy problems.

How do we resolve these challenges?
We
revived the personal financing product for government servants to
establish and cement market positioning as a preferred financial
provider for the government servants. This provides MBSB with a niche
market to serve and avoid direct competition with existing market
players.

We established REP to only promote and sell retail
financial products. This network is less costly to set up and maintain
compared with a full-fledged branch, and is able to provide high
returns.

We have outsourced the sale of retail financial
products to qualified agents nationwide, which provides a greater reach
to customers. New talents and skills have been hired from within the
industry with attractive remuneration packages. More importantly, we
offer them a better career growth due to their position as pioneers in
the company.

MBSB is leveraging on other financial institutions
for the provision of trade facilities, resulting in fee income
opportunities and the ability to become a one-stop financial solution
centre.

In the past, MBSB had been media-shy, leading to
misconceptions not being corrected. Hence, in the last two years,
improvement in the company’s image was achieved through the execution of
fresh marketing campaigns on products to increase brand awareness and
continuous meetings with analysts.

How is the company positioning itself within your industry? What are your strategies to grow or gain market share?
The
company is positioning itself as a key financial provider to the
government servants and to the corporate clientele who has been awarded
government projects. It shall continue to pursue market share in
personal financing through product development and new campaigns, while
continuing to work with the government and its agencies in securing
financing of their awarded projects.

What are your company’s plans for the future, short-term and long-term?
In
the short term, we want to grow our retail assets critically via the
personal financing and home mortgage products, and establish our
position as a reliable financial provider in the corporate segment. In
the long term, we want MBSB to become a respectable industry player with
a strong financial position while serving its niche market.

What are your plans to compete in the increasingly globalised environment?
The
company shall continue to capitalise on its strengths as a small
financial institution in comparison to its peers to compete in a highly
competitive environment. These include the agility in decision-making
process and personalised customer service, especially for corporate
clients. We will leverage on outsourcing to operate efficiently with a
fast turnaround time. The company will avoid direct competition with the
existing financial players.

What is your dream for your company? How would you like to see it in 10 years?
The
company aims to achieve pre-tax profit of RM500 million and be known as
a strong financial institution. In early 2009, we established the
“Taking MBSB to the Next Level” programme to achieve this profit target.
Record profits that were achieved for the last two consecutive years
were based on this mission and the long-term business plan being put in
place will assist the company in achieving that target.


This article appeared in The Edge Financial Daily, December 6, 2011.