Business

Monday August 24, 2009

RM500m boost for Bank Rakyat capital

By YAP LENG KUEN


KUALA LUMPUR: Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat) is looking at topping up its RM2bil paid-up capital by a further RM500mil, said managing director Datuk Kamaruzaman Che Mat.

“We are hoping to complete our study by the end of the year,’’ he told StarBiz. “If we decide to do so, it will possibly be tabled to members at our AGM next April.’’

Bank Rakyat has 1,400 co-operative and 785,000 individual members who received a dividend of 15 sen per RM1 share last year.

Its current paid-up capital has been fully subscribed and it has received requests from members to top up.

Datuk Kamaruzaman Che Mat (pic) … ‘The next two years will still be good for Islamic banking.’

If the move goes through, there will probably be a limit to the amount that can be subscribed, according to Kamaruzaman.

Members enjoy slightly better rates, for example, for personal financing where they are charged 3.5% per year for the first three years. Non-members pay 3.55%.

Domestic business growth is still vibrant and the bank aims to increase its financing assets base to RM50bil from RM46.8bil as at June this year.

“The next two years will still be good for Islamic banking in Malaysia,’’ Kamaruzaman said, adding that the first target of any regional expansion would probably be Indonesia.

“We have a niche market here to take care of,’’ he said.

The growth momentum for Islamic banking will continue as the economy improves, government revenue and recruitment go up with the private sector offering more secure jobs.

The bank has been largely unaffected by the global financial crisis except for some financing extended to employees who have been retrenched in the electronics sector.

Many of them, especially the younger ones, will pay up as any record of non-payment goes into Bank Negara’s Central Credit Reference Information System (CCRIS).

According to research carried out by the Asian Banker in 2007, Bank Rakyat ranked 12th among the world’s Islamic banks in terms of assets, followed by Maybank Islamic Bhd and Bank Islam Malaysia Bhd.

“By the end of this year, we hope to go up one or two notches based on a higher asset base,’’ Kamaruzaman said.

The bank’s strategy is to target retail lending (which makes up 90% of its loan base) and a customer base of fixed income earners who are largely government servants.

There are agreements with companies for loan repayments via monthly salary deductions and for this type of customers, the bank offers slightly better rates.

Eventually, the bank may increase corporate loans by another 10%, depending on the quality of the assets.

For the first half of this year, Bank Rakyat achieved a pre-tax profit of RM668.5mil, an increase of 29.6% over the same period last year, mainly contributed by a rise in net and fee-based income. Kamaruzaman sees pre-tax profit this year at RM1.3bil compared with RM1.2 billion last year.

He attributes the bank’s success to competitive rates offered and reasonable terms and conditions as well as fast processing and approval of loan applications.

Over time, the bank had also built up a loyal deposit base which has hit RM40.4bil.

The retail portfolio, which comprises 90% of the bank’s total lending, offers a well diversified base for a high volume game with emphasis on asset quality.

Although the focus and discipline is on basic banking, a lot of innovation goes into strategies for further market penetration, developing a performance culture and keeping the staff continuously happy despite their routine jobs.

“We work as a family and group where everyone is adequately rewarded,’’ Kamaruzaman said.

Rewards at branch level are shared and individual rewards are normally avoided.

“There may be a star performer but we have to recognise everyone who contributed, on top of their salaries and bonuses,’’ he said. “The difficult part is to make everyone continuously happy not just this year but the next year and beyond. When they are happy, they will go the extra mile.’’

The major part of the bank’s income is derived from lending activities with diversified investments in government and Islamic debt securities and deposits.

Personal financing to government servants is a major business while in the upcoming area of micro-financing, it aims to reach 7,000 micro entrepreneurs by year-end.

As at June, it had 1,026 self-help groups with 5,588 members.

Human capital is a major issue. New graduates are being recruited and trained while a succession plan is under way to identify bright, strategic leaders who can bring the bank to the next level.

On the progress in the construction of its new headquarters, Kamaruzaman said overall physical works at the site had reached 10%, with work on the superstructure due to start in February next year.

The date of completion is scheduled for November 2011.

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