MBSB sentiment makes a good buying opportunity

From the Edge:

KUALA LUMPUR: Much of Malaysia Building Society Bhd ( Financial Dashboard)’s (MBSB) net profit decline for the first quarter ended March 31, 2015 (1QFY15) was attributed to a jump in the non-bank lender’s bad loan allowance but analysts are more surprised that high loan loss provisions will be the norm for the next two years.

MBSB last week announced a sharp fall of 37% in net profit to RM124.3 million for the 1QFY15 from RM196.73 million, dragged down by the provision for impairment loss on loans, advances and financing that came in at RM101.32 million.

This is a significantly larger provision for loan losses when compared with the RM15.19 million made in the previous corresponding period, creeping close to FY14’s whole-year provision for loan losses at RM126.2 million.

This, along with a weaker Islamic banking net income, led to the big drop in MBSB’s net profit for the 1QFY15.

On a quarter-to-quarter basis, however, the 1QFY15’s loan loss allowance is comparable with the 4QFY14’s sum of RM100.1 million. This means that the non-bank lender has made a provision of over RM200 million for loan losses in just two quarters.

This could be a “kitchen-sinking” process to clean up the books.

You ever hear of the saying, buy when blood is in the waters?  This could be one of those moments if I ever saw.  MBSB's earnings most recent announcement was not good, but people are probably looking to the bad earnings prematurely.

The article points out the strengths in that the business garnishes wages directly unlike other banks and its doubtful people in government easily lose their jobs.  Civil government workers pay their loans before they pay for necessities in life, unlike most bank loans in the private sector which the borrowers can choose to pay their loans.