Facebook profit plunges 79%, revenues gain 40%

San Francisco — Facebook (Nasdaq: FB) reported a plunge in fourth-quarter profit on higher spending Wednesday, even while it made long-awaited progress luring advertisers eager to reach mobile- device users.

Net income fell 79 percent to $64 million last quarter as operating expenses jumped 82 percent, Facebook said. That outpaced a 40 percent revenue gain to $1.59 billion and raised concerns that margins will come under pressure.

The stock fell 2.8 percent in German trading, paring a drop of as much as 11 percent in late U.S. trading as investors weighed near-term lower profit against the prospect of future growth.

Still, the company delivered fourth-quarter results above Wall Street's expectations and sought to show that it has finally transformed into a "mobile company" after rising to dominance as a Web-based social network.

"Everything was slightly better than expected," said Wedbush Securities analyst Michael Pachter. "I don't see anything here that would make me want to sell the stock."

The world's largest social media company earned $64 million, or 3 cents per share, in the October-December period. That's down 79 percent from $302 million, or 14 cents per share, a year earlier when it was still a privately held company.

Revenue rose 40 percent to $1.59 billion from $1.13 billion, surpassing analysts' expectations of $1.51 billion.

Advertising revenue grew 41 percent to $1.33 billion, increasing at a faster clip than in the third quarter, when it climbed 36 percent to $1.09 billion.

Excluding special items, mainly related to stock compensation expenses, Menlo Park, Calif.-based Facebook earned 17 cents per share in the latest quarter. Analysts polled by FactSet expected lower adjusted earnings of 15 cents per share.

Nonetheless, Facebook's stock fell $1.11, or 3.6 percent, to $30.13 in after-hours trading following the earnings report.

Chief Executive Officer Mark Zuckerberg plans to increase expenses, excluding certain costs, 50 percent this year to hire staff and roll out new tools for advertisers. That’s more than the 33 percent increase projected by Pacific Crest Securities LLC, and it underscores the urgency of capturing a bigger slice of the $6.97 billion U.S. mobile-ad market. Done right, the added investment will translate to profit growth, said Adam Schneiberg, a portfolio manager at BTR Capital Management.

“Wall Street tends to be forgiving of higher spending during high-growth periods when new products are being built,” Schneiberg said. “As long as eyeballs tune in and revenue keeps growing, the Street will believe that at some point the company can flip the switch on profitability.”

Facebook shares had advanced 1.5 percent to $31.24 at the close in New York just ahead of the earnings announcement, leaving them up 76 percent from a record low close on Sept. 4.

Mobile-Ad Push

Facebook’s increased investment is designed to help the company grapple with rising competition from larger rivals in the U.S. market for mobile advertising, predicted by EMarketer Inc. to surge 82 percent this year. Google Inc. is projected to grab 57 percent of that market, and Facebook will remain a distant No. 2 with 12 percent, EMarketer estimates.

“More mobile revenue means way more spending on the operations of selling ads,” said Brian Wieser, an analyst at Pivotal Research Group LLC, who has a hold rating on the stock. “This is an expensive company to run.”

Mobile contributed 23 percent of total advertising revenue, or about $306 million, according to Facebook. That compares with 14 percent in the third quarter. Analysts at JPMorgan Chase & Co. predicted mobile would contribute $384.2 million, or 27 percent of ad revenue, in the latest quarter.

Facebook’s engineers are making improvements to mobile applications, including those for Google’s Android software, Zuckerberg said on a conference call. Better mobile services can boost user engagement, he said.

‘Big Transition’

“We made this big transition, where now there are more people using Facebook on mobile every day than on desktop,” Zuckerberg said. “More people are starting to understand that mobile is a great opportunity for us.”

Facebook is investing in new products to attract users and keep them on the site longer. Earlier this month, the company announced a revamp of its search service that lets members find information on people, places, photos and interests. The company also has upgraded its mobile applications with new versions for phones running Google’s Android software and Apple Inc.’s iPhone.

“We’re investing heavily because we see big opportunities ahead for the company,” David Ebersman, Facebook’s chief financial officer, said in an interview. “So, we’re trying to invest to build the most valuable company we can for the long term and to really invest in areas that can drive engagement.”

Narrower Margin

Zuckerberg also said that he expects to hire aggressively, causing expenses to grow at a faster rate than sales in 2013. The company had 4,619 employees at the end of last year, according to data compiled by Bloomberg.

Facebook’s fourth-quarter operating margin declined to 33 percent from 48 percent a year earlier, while costs rose to $1.06 billion from $583 million.

Facebook reached 1.06 billion users during the fourth quarter, up from 1.01 billion in the third quarter. The number of mobile users was 680 million, up from 604 million in the third quarter.

Analysts had been pushing up ratings amid growing optimism for accelerated revenue growth. The proportion of analysts covering Facebook with a buy rating has risen to 65 percent from 52 percent on Oct. 23, when Facebook posted third-quarter sales that beat estimates, according to data compiled by Bloomberg.

“A lot of these products are pretty new,” said Scott Kessler, an analyst at S&P Capital IQ, who rates the stock a hold. “It’s just going to take some time.”

- The AP and Bloomberg

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Singapore office rents to rebound as supply growth abates

Singapore’s office rents are set to rebound from their first annual decline in three years as new supply shrinks and more businesses expand, according to the biggest office property trust in Asia outside of Japan.

Rents in the city are reaching a trough and demand may rise as the country positions itself as a regional business hub, said Lynette Leong, chief executive officer of CapitaCommercial Trust (CCT), Supply for the next three years will be about 0.8 million square feet a year, down from 1.3 million square feet over the past two decades, she said.

Enlarge image

Buildings stand in the central business district in Singapore. Photographer: Munshi Ahmed/Bloomberg

Enlarge image

The towers of the Marina Bay Financial Centre stand in the central business district in Singapore. Photographer: Munshi Ahmed/Bloomberg

“Rents are poised for a recovery,” Leong said in an interview in Singapore on Jan. 24. It’s “a no-brainer that rents are not going to go down very much further so it’s more when the rents will turn and to what extent,” she said.

Ranked by the World Bank as the easiest place to do business for a seventh year, the country that’s smaller than New York City is also emerging as Asia’s wealth management center, driving demand for banking services with an increase of millionaires. Singapore office rents are the 19th-highest globally, according to CBRE Group Inc., and are cheaper than Hong Kong, Tokyo, Beijing and New Delhi.

CapitaCommercial estimates new demand accounted for 1.5 million square feet to 1.8 million square feet annually in the past three years, Leong said, without giving a forecast for 2013.

Singapore’s office rents fell 0.3 percent in the fourth quarter, extending the decline in 2012 to 1.3 percent, the government said on Jan. 25. They climbed 8.4 percent in 2011 and 13 percent in the previous year, government data showed.

Millionaire Households

The country’s millionaire households expanded 14 percent in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17 percent, the highest in the world, followed by Qatar and Kuwait.

Additional office space in the past two years came mainly from the downtown Marina Bay area, with banks including Standard Chartered Plc and Barclays (BARC) Plc taking bigger offices.

Standard Chartered relocated from 11 buildings across the city to one tower in the new office area, while Barclays moved from six to two in the district.

Average gross rents of prime office space declined 11 percent in 2012 and could fall 5 percent to 10 percent this year, Colliers International said in a Jan. 25 report. Leasing rates climbed 14.6 percent in 2011, the property brokerage said.

New tenants took up 1.9 million square feet of space last year, a 17 percent drop from the five-year high of 2.3 million square feet in 2011, Colliers said.

Too Early

“It’s still too early to pinpoint a time for a recovery,” Chia Siew Chuin, director of research & advisory at Colliers, said in a phone interview yesterday.

“Global economic headwinds are a concern and there is also a risk of secondary space that can be returned to the market should occupiers or tenants relocate to new buildings.”

Singapore’s economy expanded 1.2 percent last year, less than a quarter of the pace in 2011. Growth is expected to range between 1 percent and 3 percent this year, based on official estimates.

The city also became the first in Asia to introduce curbs on industrial properties. The government on Jan. 11 imposed as much as 15 percent in stamp duties on sellers of warehouses and logistics buildings to curb speculation after prices doubled in the past three years and outpaced the increases in rents.

Raffles Quay Asset Management Pte, which manages office towers developed jointly by billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. (1), Keppel Land Ltd. (KPLD) and Hongkong Land Holdings Ltd. (HKL), said most of its buildings are fully leased. Its latest offering, the third office tower at a Marina Bay development, is about 77 percent filled, it said.

Rent Stability

“We see stability in rents in the market,” Warren Bishop, chief executive officer of Raffles Quay Asset, said in an interview. “Given the amount of supply coming online, I don’t think it’s going to go down any further. Still, with the overall economic situation, it’s hard to predict it going up, because we have to be realistic that the situation in America and Europe is affecting the world economy.”

Singapore’s office vacancy rate has been falling since it reached a five-year high of 13 percent in the third quarter of 2010, according to government data. It fell to 9.4 percent in the fourth quarter last year, the lowest since the end of 2008.

CapitaCommercial said it filled 97.2 percent of its buildings in the fourth quarter, keeping its vacancy rate lower than the industry average. The trust, partly owned by CapitaLand Ltd., Southeast Asia’s biggest developer, increased its distributable income by 7.4 percent to S$228.5 million ($184.8 million) last year.

The trust, also the biggest office REIT by market value in Asia after Nippon Building Fund Inc. and Japan Real Estate Investment Corp., climbed 22 percent in the past six months, compared with the 8.4 percent gain in the Singapore benchmark Straits Times Index. (FSSTI) The shares climbed 1.2 percent to S$1.645 in Singapore trading today, snapping a four-day decline.

“A lot of companies are not just dependent on the Singapore GDP, but more the regional economies,” said Leong, the trust’s CEO. “And the region still looks fine, so we think that will drive demand for office space.”
- Bloomberg

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Malaysian business associations protest against minimum wage for foreigners

PUTRAJAYA: Some 100 people, claiming to represent business associations, held a brief protest against the implementation of minimum wage for foreign workers in front of the Human Resources Ministry.

A member of the steering committee reads out the group’s demands to the protesting crowd. — Picture by Zurairi AR

The group, called the Minimum Wages Implementation Steering Committee, demanded that the Government stick to the current wage level set by the embassies of the various countries whose citizens work here, and not hike it up to RM900 as is being done for local workers.

Committee member Goh Chin Siew said they want the ministry to re-examine the minimum wage requirements so that they reflect the standard of living in different areas across the country, and for the Finance and International Trade and Industry ministries to weigh in on the impact of minimum wage on Malaysians.

“Malaysians will face hyperinflation due to minimum wage, and we will also see a lot of money flowing out of the country when foreign workers remit earnings home,” he said before the group handed a memorandum on the issue to the ministry.

The group said they were only against implementation of minimum wage for foreign workers and not against minimum wage for Malaysians.

During the protest, the group chanted various slogans outlining their support for minimum wage for locals but not foreign workers.

They also held up placards in English, Malay and Chinese, asking why the Government had not “listened to our voices” and demanding that Human Resources Minister Datuk Seri Dr S. Subramaniam resign for allegedly failing to resolve the minimum wage issue.

Among the organisations that the group claimed to have secured as members are the Malacca Chinese Assembly Hall, Malay-sian Furniture Industry Council, KL-Kepong Business Recreation Club and Electrical Electronics Association Malaysia.

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Tips on courting investors

IN this penultimate column, I would like to explore the world of romance, courtship and partnership. Why some marriages are happy and long lasting and why some end in a messy divorce. I will also talk about quickie engagements, marriage of convenience and spouse for hire.

No, I am not Aunty Thelma providing counsel on your turbulent personal life. Neither am I qualified to talk about politicians and rent seekers. This discussion is confined to entrepreneurs who need partners to help them kick start their business. Occasionally, desperately sourcing capital for survival and sometimes needing a healthy dose of cash injection to grow.

For new startups, courting the investors will be the most stressful stage. Before they part with their money, they will question the viability of your business, sustainability of your business model and most importantly, the potential to scale. You are advised to be well prepared with facts and figures supporting your proposal. If a knowledgeable investor tears up your assumptions and forecast, swallow your pride and rebuild your model if necessary. You will be better prepared to face the next potential investor.

Knowing the type of investors that you would like to “sleep with” will save you unnecessary stress and avoiding misaligned discussions. Short-term investors think very differently from long-term investors. Temporary relationships means moving in together and having fun without any responsibility. Breaking up is not hard to do.

Long-term relationships requires patience, understanding and tolerance between both parties. Like all marriages, there will be fights and misunderstandings but both sides will make up and continue for the sake of the children, albeit on an uneasy truce.

If you have a quick turnaround project with an early exit plan, then you will click immediately with short-term investors who will be willing to take on higher risks but expecting immediate returns on invested capital. Normally they do not mind having a smaller equity share as long as they see good upside but you will have to pay interest or dividends on their different class of preferred shares. It is best you find out more on terms like convertible cumulative preferred stocks and RCCPS (redeemable convertible cumulative preference shares) etc ... If you want to be on the same page as these savvy investors.

If your project has a long gestation period, get a rich investor who looks for steady recurring income with an eye for capital asset growth. Be conservative with your forecast and highlight your cashflow management skills. Nothing pleases the long-term investor more than having a mature thinking partner who will conservatively build a meaningful asset business in a steady environment.

Once you have the investor interested, the real negotiation starts. Assuming all investors are fools, you will be able to load the investors with a high valuation, retain majority equity and management control and yet raise a lot of capital by giving little away. Alternatively, assuming you are the desperate fool, you would end up working for the new investors, saddled with a low valuation and stuck with minority equity stakes. Nobody likes playing the fool so either one of these relationships will definitely end up in divorce.

Basically, the whole negotiation rests on the basis of valuation. For a new startup with no prior track record, the valuation is based on forecast budgets normally over a five-year period. To investors, getting the forecast right determines the level of risks to be taken. But his guess is as good as your guess. Then you end up with two sides articulating their understanding on market trends, benchmarking best practices etc, just to justify their number guessing skills.

So the final numbers to be agreed upon will depend heavily on your negotiation skills or how much the Investors believe in you. If you are desperate, the Investor will see through that and you will not be negotiating from strength. A right minded investor would prefer to have a highly motivated entrepreneur at the controls of a start up so you will not be forcefully bullied. Just remember to tell him that you need to feel motivated when you wake up every morning and he will back off and see that you are fairly treated.

If the Investor pushes you into a corner, just walk away. You have not lost anything. That said, I assumed you have been realistic with your forecast numbers and have comfortably addressed the investors concerns. If not, do not be surprised if the investor walks away instead.

Understanding how investors think will help you prepare your proposal. Greedy investors look for maximum short-term returns and these are normally fund managers who wants to believe in well structured glossy presentations so that they can justify to their investors why they should invest their money into your project. It will be unfair for me to say that these professional fund managers are willing to invest in high risk projects since it is not their personal money but the pressure to perform forces them to take higher risks that carries higher returns.

Individual investors are way too careful and they prefer proposals with reduced risks and long-term asset building models. This has been my preferred business model as an entrepreneur then and even now as an investor. But the lure of fast short-term gains enjoyed by so many has whetted my appetite and I am now reconsidering my investment strategies. Greed is indeed sinful and irresistible.

Since I made a promise not to write about politicians and GLCs (government-linked corporations), I will not be elaborating on the topics of quickie engagements and marriage of convenience. I apologise if you have found this column dry and boring but I hope my advice on having safe sex in a monogamous marriage will help you live longer with a healthy bank balance by your side. Stay happy always.

ON YOUR OWN
By TAN THIAM HOCK

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Homeless in Penang no shelter !

The homeless in Penang are facing a hard time.

Non-governmental organisations (NGOs) have pointed out that the state still has no government shelter for the homeless and needy, even though Penang has a large number of homeless people.

According to NGO volunteers, there are only two free-of-charge stay-in shelters in the state and these are run by NGOs.

The volunteers claimed that the DAP-led state government had promised to build a shelter when it came to power in 2008, but nothing had materialised so far.

As a result, hundreds of homeless people could be found at public places, such as bus stops, five-foot ways, under bridges and on pedestrian crossings, according to P. Muru¬giah, coordinator of the Temple of Fine Arts' Klinik Derma Sivasanta.

He said that half of the 70 or 80 needy patients treated by the charity clinic twice a week were in fact homeless.

"The Government needs to build a shelter for the homeless and provide medical care for them," he told The Star Online.

Murugiah said his clinic had even collected and cremated 40 unclaimed bodies last year.

He suggested that Penang had a high number of homeless people because the state was densely populated with many senior citizens, and some of these were neglected by their children.

A volunteer at Kawan, a drop-in centre for the homeless and needy, said homeless people were made up of vagrants, the mentally-ill, drug addicts, as well as unemployed youths from other states.

"Half of them are those aged 50 and above and illiterate," said the volunteer, who gave his name as James.

"There is a sizeable number of elderly people and the government needs to set up a shelter quickly."

A doctor in George Town, who declined to be named, told The Star Online that the federal government should step in to solve the problem.

Once again, the disadvantaged sections of society have received no help from Guan Eng's administration, forcing the Barisan Nasional government to step in to help Penangites.

If it was affordable housing earlier, this time it is shelters for the homeless. Either way, the federal government has always carried out its responsibility to the people whereas the DAP-led state government has been found wanting.

Sources: thechoice.my

Penang homeless need shelter

I STRONGLY support the call by various NGOs for a shelter for the homeless and needy in Penang.

Many of these homeless people sleep on corridors outside shops and temples. Some sleep in sheds and bus stops during the night, and try and get some work during the day.

The elderly and sick end up in hospitals and refuse to leave the wards when they are discharged because they have no home to go back to.

The state Welfare Department’s regular beggar raids cannot ease the situation because only those without serious medical problems and are above 60 years old can enter government-run old folks home.

The rest of the homeless go back to the streets because they cannot afford to rent rooms.

It is high time that the Federal and state governments work with NGOs in Penang to identify a place and start this service. The authorities need to provide support and allocate funds, and not let NGOs run shelter homes in the name of charity.

These shelter homes must also have trained social workers and volunteers.

As Penang strives to retain its modern and heritage status, social service for the needy and disadvantaged groups must always be part of the plan.

LIM B. EAN Penang The Star

International Financial Reporting Standards gets in a sticky muddle

ACCOUNTING is a subject that most people dread, for fear of its dry and lengthy text. Nonetheless, it is of utmost importance in the business world for without it, businesses would have no proper and standardised system to run on.

Having studied the subject at high school, which then led to graduating with a bachelor's degree in accounting and finance, I have to admit that the subject was not one of my favourites. I was one of those, mentioned earlier, who feared the subject because of its lack of obvious colour.

At university, I took a paper on financial accounting principles, which included the study of financial reporting standards. Trust me, it was one where my memory skills were tested and fully put to good use.

Don't get me wrong. It's not that I didn't like the subject at all. It was probably more of a frustration because I lacked the understanding then. I only truly began to understand it when I started my working career.

The Malaysian Accounting Standards Board (MASB) enforced the International Financial Reporting Standards (IFRS) created by the International Accounting Standards Board (IASB) last year. As a result, many companies had implemented IFRS as at January 2012.

Although most have not been burdened too much by the change, several parties are dealing with issues of implementing the IFRS as doing so would result in a huge variance in financial reporting.

The implementation of IFRS has left both property developers and plantation operators in a sticky situation. Both parties' issues have to do with International Financial Reporting Interpretation Committee (IFRIC) Interpretation 15, and IFRS 13.

IFRIC Interpretation 15 deals with revenue recognition, and under this interpretation, property developers would recognise revenue only upon completion and handover of the properties to the buyers. This is different from the more common method of revenue recognition used in Malaysia, which is the sell-then-build method.

This could gravely affect the smaller developers that have less construction projects, which would take several years to complete.

Then, there's IFRS 13 which is the standard dealing with fair value measurement. If implemented, it could mean that the fair value of land for non-plantation use could be higher than the fair value of the same land with existing crops on it.

Technically, the result would be that a zero value is assigned to the agricultural crops on the land. This is due to the interaction between IFRS 13 and International Accounting Standards 41, which allows a residual approach in fair value determination of land and assets. At times, the best use for the land varies from its current use, which means that using a residual approach could result in a minimal or zero value given to the crops.

The MASB has given property developers and plantation owners until January 2014 to implement IFRIC Interpretation 15 and IFRS 13 in view of the issues that will arise if it should be implemented now.

Meanwhile, the issues have been raised to the IASB and the IFRS Interpretations Committee.

Seeing that there's still some time for a compromise to be reached, let's keep our fingers crossed that an amicable arrangement can be achieved.

By WONG WEI-SHEN
weishen.wong@thestar.com.my

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Banks need to be transparent on housing loan

STANDARDISING and simplifying housing loan documents is a step forward. Kudos to Pemudah (Special Taskforce to facilitate business), Bank Negara and the Association of Banks in Malaysia (ABM). It will be an excellent move to reign in the rogue banks, financial institutions (FIs) and development financial institutions (DFIs).

The National House Buyers Association (HBA) views the recent standardisation of loan agreements for housing loans below RM500,000 positively. For many years, HBA has been calling for greater protection for house buyers when they buy from developers and for borrowers when taking a housing loan.

As a typical housing loan ranges between 20 and 30 years, borrowers are stuck with the terms and conditions (T&Cs) of the housing loan for a long time. Unfortunately, most borrowers do not really understand the T&Cs of housing loan, as:

(i) The loan agreements are lengthy, running between 20 and 30 pages;

(ii) They are filled with legal terms and jargon that even borrowers with a law degree will still need their legal dictionary for reference.

Even for borrowers who are law-savvy, the loan agreement is a one-way traffic; the borrower must accept all the T&Cs or find another bank, as the banks will not vary any T&Cs. However, the scenario is the same for all banks and borrowers are at their mercy. (banks in this context includeFIs and DFIs).

Another grave injustice is that the cost of legal fees for the said housing loan is borne by the borrower although the lawyer is in fact, representing the banks and on its panel, and is in no position to advise the borrower. The borrower will be required to appoint his own lawyer should he require any legal advice. But this will be futile as banks will not agree to vary any T&Cs of the loan agreements.

Standardised Loan Agreement

HBA has been urging banks in Malaysia to be fair and transparent in their dealing with borrowers. Hence, credit must be given to “participating banks” for finally agreeing to adopt a standardised template for housing loans with simplified language which is easy for the layman to understand.

Based on our quick analysis of the Standardised Loan Agreement which can be downloaded from the website of the Association of Banks in Malaysia (www.abm.org.my), the agreement does appear to contain less legal jargon and is written in a manner which is easier for the borrower to understand.

The agreement also does away with unnecessary and ridiculous restrictions that certain bank previously impose on borrowers taking housing loans, such as:

● Borrowers cannot rent out the property without the consent of the banks;
● Borrowers cannot undertake any renovations without the consent of the banks; and
● Hidden clauses which impose various hidden charges and penalties such as late payment charges on borrowers

Based on our preliminary assessment, HBA views the agreement positively and we urge the banks and Bank Negara to further improve on the following areas:

Remove the RM500,000 cap

HBA calls for the RM500,000 limit for the Standardised Loan Agreement to be removed. This agreement should be applicable for all housing loans regardless of the amount, as the nature of the housing loan is the same. Already, most landed properties in areas such as Puchong and Kota Damansara are in excess of RM500,000. Even strata-properties in locations such as Bandar Utama, Ara Damansara are already in excess of RM500,000. Why not extend the coverage to all housing loans per se?

All industry players must adopt the standardised loan agreement

It would appear that the standardised loan agreement is being used by certain participating banks on a voluntarily basis and not all commercial banks which give out housing loans are adopting this agreement. Why is this the case? Bank Negara should compel all commercial banks to adopt this standardised agreement. In addition, non-banking Institutions that give out housing loans, such as DFIs, insurance companies must also be compelled to adopt the agreement. Why shouldn't the house buyers offered similar protection here?

Non-members of ABM such as DFIs include Bank Islam, Bank Muamalat, Bank Rakyat, Agro Bank, Bank Industri, Bank Simpanan Nasional and EXIM Bank which are formulated under their respective legislations.

Remove unnecessary fees and charges imposed on borrowers 

Certain banks currently impose unnecessary fees and charges on borrowers when they request for bank statements which are needed when sthey want to settle/refinance their housing loans, or when making EPF withdrawals to reduce their housing loans. While the fees of up to RM50 may not seem much to some people, it still is an exorbitant amount as it cost banks next to nothing to produce such statements. Moreover, it is the borrowers' right to settle/refinance the loan and/or to make EPF withdrawals to reduce their loans. A bank statement showing the principal sum outstanding is required to facilitate such transactions.

By imposing fees of up to RM50 to prepare such simple statements, banks are blatantly taking advantage of their customers as they have no choice but to pay the charges just to ensure that the transaction goes through.

HBA is calling for banks to be prohibited from charging fees for these statement to facilitate repayment, refinancing or to make EPF withdrawals to reduce their loans. Some Banks are already charging RM10 for “reprint” of a bank statement on current accounts. Can you imagine a situation where the customer has not received his monthly bank statement for whatever reason and has to pay RM10 for a “reprint” of his own bank statement?

Banks can unilaterally vary theinterest rate

However, upon closer inspection of the standardised template, HBA noticed that a clause currently found in most housing loans has been carried forward. .

Even if the borrower had faithfully paid all his dues and installments' on time, the bank is entitled to vary the interest rate unilaterally at any time during the loan tenure. There is no such thing as sanctity of a binding contract between the borrower and the banks.

As we know, the current interest rates for housing loans are competitive, with some banks willing to go as low as BLR less 2.50%. So, what this can mean is that a few years down the road, when the banks realise that such low interest rates are no longer feasible, they can vary the interest rate from say BLR less 2.50% to BLR PLUS 2.50% and the borrower is obliged to pay the new interest rate. Furthermore, if the previous installment was only RM1,500 a month and the new installment due to the revised interest rate is RM2,500, the borrower must pay the new rate or risk the bank repossessing his house.

HBA urgently calls for Bank Negara to repeal this clause to prevent banks from having the upper hand to victimise unsuspecting borrowers. Banks must not be able to unilaterally vary the interest rate if the borrower had not defaulted on his obligations' under the loan agreement. Banks may say that they will not normally invoke/exercise the said clause. But, covenanted terms and conditions are binding upon both parties.

Lawyers have to purchase standard forms from banks

Nowadays, law firms undertaking banks' work have to purchase standardised pre-printed forms from banks. The price ranges from RM150-RM350. Would printing cost be so expensive or are banks making a profit or “mark-up” from such sales to law firms?

Such “expenses” are nevertheless passed down to customers/ borrowers as disbursements. Couldn't a “soft copy” be made available to law firms to adopt and print at their own cost and expense? Printing charges are only limited to RM50 as approved by the Bar Council.

Apportionment of payment to interest and principal shrouded in secrecy

Another grave injustice to borrowers is the allocation of monthly installments towards the settlement of principal and interest as this is not disclosed anywhere in the Loan Agreements' or even in the Standardised Template.

To illustrate a real life example, we had a complainant who took a 20-year housing loan about six years ago. After diligently paying his loan for five years, the complainant assumed that the principal amount outstanding should only be about 75% of the original amount. Unfortunately, the complainant had personally experienced, the amount was closer to 83%.

There need to be greater transparency on how the allocation of monthly repayments for interest and principal is done and this must be disclosed in the loan agreement. Moreover, the allocation must be done on a “straight line basis” so, after paying five out of a 20-year housing loan, the principal outstanding must be 75% of the original amount.

Conclusion

HBA calls for banks to continue to take cognisant of their borrowers' hardship and protect the interest of their borrowers instead of just focusing on profitability. Without the borrowers and customers, banks will not have any profits to show.

HBA also calls on Bank Negara to continue the close monitoring of banks to ensure that they do not take advantage of borrowers. The battle of borrowers against banks is akin to David vs Goliath. Timely intervention from Bank Negara is needed to balance the scale of power.

BUYERS BEWARE
By CHANG KIM LOONG

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association, a non-profit, non-governmental organisation purely manned by volunteers. You can log in to www.hba.org.my

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