Malayan Banking Bhd announced that its interim net profit rose 19 percent year-on-year, but prospects remained cloudy amid war threats in Iraq.

Net profit rose to RM897.81 million in the six months to December, from RM753.166 million a year earlier, boosted by a 23 percent drop in loan loss provisions to RM535.409 million, it said.

The net non-performing loans (NPL) ratio fell concurrently to 7.3 percent of total loans as at end-December, from 8.4 percent a year earlier. For the half year, total loans and advances expanded to RM108.80 billion from RM105.80 billion a year earlier, with loans growth of 5.7 percent o­n an annualised basis.

The bank said loans extended to small and medium-sized industries and consumer financing were particularly strong.

But its investment banking business was affected by lower fee-based income which reflected the difficult conditions in equity markets.

Worries over war

Malayan Banking president and chief executive Amirsham Aziz told reporters that prospects of war in Iraq cast a shadow over the company's outlook in the second half of the year.

"It is difficult to make any forecast in the next six months as we don't know where it will go if there is a war. If there is no war (but the crisis) is prolonged, that in itself is an uncertainty," he said.

Amirsham said loans growth was likely to remain between five and six percent for the rest of the financial year, with NPL seen o­n a declining trend.

The bank has already cut its rates for mortgages, hire purchase and other consumer loans to cope with intense competition and huge liquidity in the banking system estimated at around RM45 billion, he said.

He predicted interest rates to remain stable in the next six months to a year, and said Malayan Banking's strategy was to contain costs and diversify its earnings base to remain competitive. AFP