Bank Islam upbeat on growth despite new lending guidelines

KUALA LUMPUR (July 10, 2013): Bank Islam Malaysia Bhd is confident of achieving 10% to 20% growth in its consumer banking business despite the new lending guidelines announced by Bank Negara Malaysia (BNM) last Friday, said the bank's business development director Khairul Kamarudin (pix).

"We welcome BNM's regulation because it's good for the industry. It's still healthy and it does not prevent customers from coming to the bank. Credit is still accessible but within those boundaries set by BNM," he told reporters at the launch of Bank Islam's Visa Platinum Credit Card-i yesterday.

"For us, we welcome the ruling very much…we do not expect to see deterioration in our numbers. If any, it would be marginal."

The central bank had on Friday announced a maximum tenure of 10 years for personal financing and a maximum of 35 years for property purchases. It also prohibited the offering of pre-approved personal financing products.

"In our consumer banking portfolio, personal financing is about 30% while credit card accounts for about 5% or less. If you were to compare us with other banks or non-bank financial institutions, they have personal financing of 70% to 80% in their portfolio.

"So for us it's not going to be a significant impact. Plus we've never done anything above 15 years. There are some banks that stretch the (financing) tenure up to 25 years, that's something we don't do.

"If you look at our existing portfolio, almost 95% (of our customers) are below 35 years and anyway, the guideline or policy is not retrospect so those already with us will continue to enjoy the original terms and conditions," said Khairul.

He added that housing loans make up about 50% of its consumer banking portfolio but it does not have many housing loans that exceed 35 years.

He said the banks would have to improvise on distribution channels to remain competitive and banks that already have strong channels will attract customers.

"For certain banks with weak channels in distributing the products, they might see 4% to 5% depreciation or even more. For banks like Bank Islam who already have the channels in place, we may not see any deterioration in the numbers month-on-month. I'm confident Bank Islam numbers will continue to improve because our channels are already there," he added.

On the new credit card, Khairul said it expects 25,000 to 30,000 new card members by year-end. It currently has 138,000 active credit card members, of which 2,000 are Platinum card members. In total, the bank has 1.6 million debit and credit cards in circulation, of which 1.4 million are debit card members.

"Following the credit card rules implemented about three years ago, we saw a lot of attrition. A lot of cardholders moved or cancelled their cards. But what we saw interestingly was, this only happened to the Classic and Gold cards. For the premier cards, we saw an increase.

"It used to be 70% for lower and middle income and 30% for premier cards (as of January 2012) but lately we have seen the trend moving towards higher income. As such, it's an opportune time for us to ride the wave and launch the Platinum product," he said.

Its new loyalty programme, TruRewards, was also launched yesterday, to help attract card members from other banks to take up its products.