Malaysia’s premier development bank, Bank Pembangunan Malaysia Berhad has announced its 2020 annual financial figures with mixed results.

The bank did manage to achieve a 2.54% growth in its financing portfolio, increasing its gross portfolio size to RM18.5 billion, its first growth since 2016, mainly attributed to higher disbursements from existing and new financings. In 2020, BPMB undertook an exercise to redeem its borrowings totalling RM1.2 billion ahead of schedule. This was done to reduce the Bank’s Conventional liabilities as part of an effort to become a Full-Fledged Islamic Development Financial Institution and generate net finance expense savings. Consequently, this exercise has led to a drop in the Group’s total liabilities to RM15.5 billion in 2020, which represents a 7.5% decrease compared to last year

On its Gross Impaired Financing ratio (“GIF”) the bank showed a marked improvement to 11.3% in 2020 compared to 12.2% in 2019 due to a larger financing base as a result of the growth in the financing portfolio. In addition, overhead expenses also saw a slight dip to RM107.1 million from RM113.5 million the year before.

Profits however took a massive dip, BPMB recorded a net profit of RM107.1 million a decrease of 57% from RM251.6 million for the Financial Year 2019. This was primarily as a result of larger allowances for impairment losses on loans, financing and advances, which has increased by about seven times, which it attributes to the pandemic’s effects on the economy and the financial health of BPMB’s customers. Much of this allowance it said was for the construction sector and the hotel industry within its portfolio, with these two sectors contributing almost 75% of the total impairment allowance for 2020. Similarly, at the Bank level, a fall in net profit to RM100.8 million was recorded, which represents a 68% decrease from a year ago.

BPMB’s Chairman, Dato’ Sri Nazir Razak formerly of CIMB expects the another challenging year ahead but assures the bank will continue to be understanding and help its customers through these extraordinary times. With the government calling on banks to assist the people and businesses, this bank is committed to engage and extend the loan moratorium under the Pemulih package announced recently.

Its a fine balance, but the financial institutions will need to trade carefully as to not stretch its borrowings to the extend of a collapse, these results reflect on how narrow their margins are and if the NPL continues to head north our banking system could be staring at another crisis.