Saturday, August 03, 2013

Appointment of Datuk Abdul Farid Alias as the New President and CEO of Malayan Banking Bhd


The DAP welcomes the new appointment of Datuk Abdul Farid Alias as the new President and Chief Executive Officer of Malayan Banking Bhd (Maybank) to replace Datuk Abdul Wahid Omar who was tapped to be a Minister in the Prime Minister’s Department.

The position comes with the heaviest of responsibility to lead Malaysia’s largest bank by assets, and the single largest Government-linked company by market capitalisation – RM40 billion - on Bursa Malaysia. We hope to see under Datuk Farid’s leadership that Maybank will not only continue to be a giant in the country but will become a leader in Asia Pacific.

According to the latest rankings from The Banker of The Financial Times, Maybank, with a tier-1 capital of US$12.61 billion (RM40.89 billion), is ranked 15th among Asia-Pacific (excluding China and Japan) banks. The bank is ranked 95th in the world. Our neighbours Singapore has 3 banks ranked higher than Maybank – DBS, OCBC and UOB placed at 58th, 74th and 80th respectively. Therefore we certainly hope to see continued progress of our global rankings during Datuk Farid’s reign.

The performance of Maybank is a matter of public interest not only because it is a matter of national pride, but more importantly because nearly 70% of Maybank is owned by public funds managed by Permodalan Nasional Bhd, Employees Provident Fund, FELDA, KWAP and LTAT. Any crisis at Maybank will not only have a systemic impact on the entire Malaysian banking system but will create massive losses for our public funds.

Therefore we hope that the new Maybank CEO will focus on expansion in Southeast Asia per his interview with Bernama, Datuk Farid will also take concrete steps to enhance corporate governance, accountability and transparency within the Banking group to ensure that the interest of all Malaysians are protected.

In this respect, we hope that Datuk Farid will be able to shed more light on the sale of “5,065,380,000 ordinary shares in BII (Bank Internasional Indonesia), representing approximately 9% of the issued and paid-up share capital of BII, to a third party investor”, as announced by the Bank in June.

The curious question was raised when there was no mention of the price of the transaction, and no mention of who this 3rd party investor was. The price of the transaction is crucial because that will determine if Maybank had made and realised losses in the sale in the light of the fierce criticisms it received from all parties during the acquisition in 2008. BII was acquired at the cost of RM8.25 billion at approximately Rp455 per share in 2008.

As late a January 2012, Maybank Chairman Tan Sri Megat Zaharuddin bin Megat Mohd Nor told Reuters that Maybank is “not going to sell down if we're going to make a loss compared to what we thought it should be.” Tan Sri Zaharuddin, who is also BII's president commissioner, said the bank will not sell BII's stake below Rp510 per share, the price it paid to buy the bank in 2008 before discount.

However, in the 1st July 2013 issue of The Edge, it was revealed “according to banking sources” that the 9% stake had been sold at Rp355 per share, or a significant 21.9% lower than the cost of acquisition. This 9% stake sale will immediately translate to an estimated realised loss of RM157 million. And if these loss is extrapolated, Maybank could be looking at a potential loss of RM1.74 billion.

What is worse is if we were to look at BII’s stock price performance since the acquisition 5 years ago. As at last week, BII shares closed at Rp315 or a 30.7% drop from the acquisition price. This is despite the global equity markets hitting record highs currently. At this price, Maybank is already staring at staggering paper losses of RM2.5 billion as a result of the BII acquisition.

In fact since the acquistion, the return on Maybank’s investment in BII has been abysmal at -0.17%, 1.86%, 2.31% and 6.27% in 2009, 2010, 2011 and 2012 respectively.

Despite the above, in the announcement to Bursa Malaysia, Maybank has claimed that “the disposal will not result in any material financial impact to the Group”. Evidence obviously points to the contrary, hence it is crucial now for Maybank to come clean, particularly with regards to the most recent disposal of 9% of BII’s shares at Rp355 per share. More losses will likely be realised when Maybank is forced to sell another 8.3% of BII shares to third parties by 31 December 2013, the new extended deadine granted.

Thus we hope Datuk Farid will take the necessary steps to explain and clarify the above investment losses, and make Maybank an example to follow with regards to corporate governance, transparency and accountability.
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