Mainstream
Reshuffle brewing at the top
Khairul Khalid 
Clockwise from left: Agrobank’s Wan Mohd Fadzmi, Bank Pembangunan’s Rafidz, Public Bank’s Teh, Bank Islam’s Khairul, Ambank’s Sulaiman and RHB Bank’s Khairussaleh
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The next 12 months could see major shifts in Malaysia’s financial landscape, triggering changes at the top ranks of major banking groups.

The changes come amidst the backdrop of a challenging economy, as well as issues that banks are grappling with, such as financial technology. Mergers could be the biggest catalyst for management change, but reshuffling among government-linked banks is also imminent, especially with a general election around the corner.

Among those affected are Bank Pembangunan Malaysia Bhd, Agrobank Bhd, Public Bank Bhd, AMMB Holdings Bhd (Ambank), RHB Bank Bhd, BIMB Holdings Bhd and Malaysia Building Society Bhd (MBSB).

Bank Pembangunan and BIMB are without a CEO while Agrobank could see a change at the helm. Public Bank has announced that its founder/chairman is retiring in 2019 while the AMMB-RHB merger could see either head honcho helming the merged entity. MBSB’s merger with Asian Finance Bank Bhd could see the former’s CEO retaining his position.

Industry sources tell FocusM a major reshuffle at the top is already on the cards for two banks owned by the Ministry of Finance (MoF) – Bank Pembangunan and Agrobank.

Of the two, Bank Pembangunan could be the most likely to announce new executive leadership soon. Its previous president and managing director Mohammed Rafidz Ahmed Rasiddi stepped down two months ago without much fanfare.

FocusM spoke to a bank representative who confirmed Rafidz’s departure.

The official says Rafidz left in June after his two-year contract ended, adding that no official announcement had been made on his departure. In his absence, the bank’s chief operating officer Afidah Mohamad Ghazali is also acting president and group managing director.

Although Bank Pembangunan declined comment on Rafidz’s successor, a source says the name of a candidate for the top post has been submitted to the authorities for approval, and it is just a matter of time before the name of the new managing director is announced.

Bank Pembangunan is mandated to provide medium- to long-term Islamic and conventional financing facilities to strategic sectors such as infrastructure, maritime, technology, and oil and gas (O&G).

Rafidz was appointed president and group managing director on June 15, 2015. Prior to that, he was deputy CEO and head of corporate investment banking at MIDF Amanah Investment Bank Bhd. In 2011, he was CEO of Alliance Investment Bank Bhd.

One of Rafidz’s main targets when he took charge at Bank Pembangunan was to tighten its credit policy and reduce overall non-performing loans (NPLs) from 12% in 2015 to single digits in 2017. At press time, there was no available official data as to whether these targets had been met.

The bulk of Bank Pembangunan’s NPLs are from the infrastructure and technology sectors. For its financial year ended Dec 31, 2015 (FY15), the bank’s funding for infrastructure projects accounted for 86.4% of its financing and loan portfolio. For the same period, financing and loans for 18 infrastructure projects worth RM2.83 bil were approved.

In FY15, RM2.8 bil or 80.0% was channelled to the infrastructure sector, RM500 mil (14.3%) to technology and the balance RM200 mil (5.7%) to maritime. There were no approvals for O&G-related loans in 2015. In FY15, the bank’s total assets amounted to RM26.7 bil, down from RM29.2 bil the previous year.


Agrobank CEO poser

The other MoF-owned bank that could see a possible change of guard soon is Agrobank whose president and CEO Datuk Wan Mohd Fadzmi Wan Othman is rumoured to be wanting to step down.

A source says he won’t be renewing his contract, although it is unclear when he will step down or who his successor might be. At press time, Agrobank has not responded to FocusM’s queries on this matter.

If true, Wan Mohd Fadzmi’s imminent departure would be felt as the general consensus is that he has been doing a good job at the bank since his appointment in July 2011.

Last May, he was named Outstanding CEO of the Year by the Association of Development Financing Institutions in Asia and the Pacific, an organisation of banks and financial institutions in financing of and advocacy for sustainable development in the Asia-Pacific region. It has 106 members in 39 countries and territories.

Before joining Agrobank, Wan Mohd Fadzmi was director of RHB Bank’s Global Financial Banking Strategic Business Group responsible for international banking operations in Singapore, Thailand and Brunei.

Prior to his RHB stint, he was with the Maybank group for 22 years and held various management positions, including as general manager/head of branches in London, New York and Hong Kong. One of his key achievements was transforming Agrobank into a full-fledged Islamic bank in 2015.

Wan Mohd Fadzmi had also indicated that one of his major targets was to lower Agrobank’s NPLs, which stood at 22.7% when he took over in 2011.

Agrobank was formerly called Bank Pertanian Malaysia with 40 years experience in agricultural banking. It is a government-owned bank under MoF Incorporated.

The establishment of Bank Pertanian in 1969 was in line with the government’s move to carry out irrigation projects to accommodate double cropping for paddy planting in Kedah and Perlis, known as the Muda Agricultural Development Authority area.

To provide credit assistance to farmers, two branches were opened – the first in Alor Setar, Kedah in April 1970, followed by Kota Bharu in Kelantan. By 1980, Bank Pertanian was the largest credit service provider to the rural agriculture sector.

Bank financing for the agriculture sector is driven by a policy set by the Ministry of Agriculture and Agro-based Industry. Agrobank has 186 branches nationwide.

Besides the two government-owned banks, the impending retirement of a prominent banking figure the past five decades has fuelled speculation on the bank’s leadership succession.

On July 31, Public Bank announced that its 87-year-old non-executive chairman Tan Sri Teh Hong Piow would retire on Jan 1, 2019.

Although the bank still has more than a year until Teh’s departure, the perennial question of who will control the bank founded by him in 1965 at age 35, has resurfaced.

A local analyst says despite Teh’s non-executive role, his potential successor will still be watched closely as the market looks for signals of any major changes in the company’s future direction.

“To many long-time investors, Teh has been the face of Public Bank for decades. Although its top management has a solid track record, many will be wondering what the bank’s direction will be after he steps down,” he says.

Teh’s looming departure also fuels speculation about possible mergers involving Public Bank and other banks, possibly Hong Leong Bank Bhd. These are the only two major banks that have not been in the frame in recent years for mergers and acquisitions, although there have been no concrete talks of any deal yet.

Teh holds a 23.5% stake in Public Bank and will still be retained in an advisory role to the group, which is the second-largest listed banking group by market capitalisation.

He will also retire as chairman of two of the bank’s subsidiaries, Public Islamic Bank Bhd and Public Investment Bank Bhd, on Jan 1 next year, but will remain as non-executive director. Hence, there will be speculation in the next few months on possible successors in the group’s Islamic banking unit.


BIMB saga unresolved

An ongoing leadership saga that is still unresolved is BIMB’s top job. Last June, Khairul Kamarudin was appointed Bank Islam’s new CEO after months of speculation, but there is still a question mark hanging over the top post at BIMB, the bank’s listed parent company.

Khairul’s predecessor Datuk Zukri Samat was at the helm of both Bank Islam and BIMB before he stepped down on June 8. On May 31, BIMB announced that its board had appointed group chief strategy officer Hizamuddin Jamaluddin designated officer principally in charge
of BIMB’s daily operations,
and will announce the appointment of group CEO in due course.

Why is BIMB’s hot seat still unresolved? It is believed that its board strongly backs Khairul to lead both BIMB and Bank Islam considering his good track record in turning the latter around together with Zukri.

However, the board’s position is at odds with Lembaga Tabung Haji’s, BIMB’s largest shareholder. The pilgrims fund board has openly favoured
its own deputy CEO Badlisyah Abdul Ghani for both hot seats since Zukri announced his retirement early this year. In fact, Badlisyah was strongly rumoured to head Bank Islam before Khairul’s appointment was announced.

Before joining Tabung Haji, Badlisyah was CEO of CIMB Islamic Bank Bhd, the country head of Middle East and Brunei of CIMB Group, and was attached with Bank Islam’s offshore banking subsidiary.

Although Khairul is said to be the board’s number one choice, rumours persist that Badlisyah still has a chance for BIMB’s top post. This could be seen as a compromise for him losing out on the Bank Islam’s top job.

A local banking analyst says although BIMB is in capable hands with Hizamuddin temporarily in charge, the delay in naming a CEO could fuel unnecessary speculation and negative sentiments about the company.

“It has been going on for many months. To restore market confidence, they should have resolved the issue by now, whether it is Khairul or someone else (for the top post).”

Other than retirements, mergers and acquisitions could also be the impetus for major leadership changes.


RHB Bank, Ambank mega merger

Last June, RHB Bank and Ambank announced that they had obtained approval from Bank Negara to start talks on a proposed merger.

The deal is proposed to be an all-share merger between the fourth (RHB) and sixth (Ambank) largest bank in the country. Both banks have until the end of September to discuss the deal on an exclusive basis. If the deal goes through, the question of who will lead the banking giant with almost RM370 bil in assets will inevitably arise.

Both RHB group MD and CEO Datuk Khairussaleh Ramli as well as AmBank Group CEO Datuk Sulaiman Mohd Tahir will of course be prime candidates to lead the merged entity, with the former the slight favourite due to his position as head of the larger bank.

Nevertheless, a source says the issue of who heads the merged bank, if it goes through, is not as clear cut. “Both Khairussaleh and Sulaiman are well respected in the industry, and could do a good job heading the merged bank.

Another potential deal in the horizon is the proposed merger between MBSB and Asian Finance Bank to transform the former into a full-fledged Islamic bank.

The deal is likely to see MBSB acquire Asian Finance Bank, with the former having submitted its proposal to Bank Negara for approval. If the proposed merger goes ahead, MBSB president and CEO Datuk Ahmad Zaini Othman is expected to head the merged entity.

MBSB’s single-largest shareholder is the EPF with a 65.4% stake while Asian Finance Bank’s shareholders are Qatar Islamic Bank (66.67%), RUSB Investment Bank Inc (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain WLL (6.67%).

MBSB aborted its previous two merger deals. Last year, its proposed merger with Bank Muamalat Malaysia Bhd failed, believed to be due to differences over valuation and control.

In 2015, MBSB’s three-way merger with CIMB Group Holdings Bhd and RHB Capital Bhd was called off too.



Banking groups in transition

Stephanie Jacob


Public Bank Bhd

Public Bank Bhd is the country’s second largest bank with a market capitalisation of RM79.5 bil. It was founded in 1966 by chairman Tan Sri Teh Hong Piow.

Teh will be stepping down in 2019 after 51 years at the helm, to be chairman emeritus and adviser. Public Bank has not announced his successor. Tan Sri Tay Ah Lek is the bank’s managing director 
and CEO.

Teh is the largest shareholder with a 23.5% stake followed by the Employees Provident Fund (EPF) with 12.3%. 

Public Bank’s H1FY17 revenue rose 4% to RM5.2 bil from RM5 bil year-on-year (yoy). Net profit was up 8.7% to RM1.74 bil from RM1.6 bil. 

The stronger earnings were driven by higher net interest income from better net interest margins and loan growth. 

MIDF Research believes the bank will achieve its FY17 targets with the exception of loan growth. Nonetheless, it maintains its FY17 and FY18 forecasts. 

It highlights the bank’s stable asset quality as one of its most appealing features. “This stability in asset quality is a major appeal ... with the expectations of sustainable profitability, we maintain buy with an unchanged target price of RM23.30.” The counter closed at RM20.,60 on Aug 3. 


BIMB Holdings Bhd

Established in March 1997, BIMB Holdings is the seventh largest banking group with a market capitalisation of RM7.3 bil bil. Its largest shareholder is Lembaga Tabung Haji with a 52.4% stake. 

BIMB wholly owns Bank Islam, 60% of Syarikat Takaful Malaysia Bhd (1985) and 100% of BIMB Securities Sdn Bhd. 

On June 8, CEO of BIMB Group and Bank Islam, Datuk Seri Zukri Samat, retired. In June, Bank Islam announced deputy CEO Khairul Kamarudin would take over as CEO. 

Zukri’s replacement at the group level has not been made. Khairul is believed to be the preferred candidate and his name has reportedly been submitted for Bank Negara Malaysia’s approval. 

Before retiring, Zukri said BIMB was looking at restructuring, including possibly hiving off Syarikat Takaful and BIMB Securities. However, BIMB says no buyers have been identified. 

In Q1FY17, BIMB’s revenue rose 3.2% to RM919.6 mil from RM891 mil yoy, driving net profit 13.3% higher to RM173.9 from RM153.4 mil. 

Hong Leong Investment Bank maintains its buy rating on BIMB as it expects a decent performance this year and offers investors exposure to the Islamic finance sector. 

“We are positive that BIMB is in the pole position to benefit from further proliferation of Islamic financial services,” it says. 


Bank Pembangunan Malaysia Bhd

Mandated as a development financial institution, Bank Pembangunan (BPMB) offers medium- to long-term financing to several mandated sectors. Loans are offered for projects in the oil and gas (O&G), maritime, technology and infrastructure industries.

BPMB is wholly owned by the Ministry of Finance (MoF) via MoF Incorporated. It has been helmed by chairman Tan Sri Wan Abdul Aziz Wan Abdullah since December 2012. 

Its chief operating officer Afidah Mohamad Ghazali is also acting president and group MD following Mohammed Rafidz Ahmed Rasiddi’s exit in June. 

A successor has not been named but FocusM understands a candidate has been identified and his name has been submitted to Bank Negara Malaysia for approval. 

In its latest available results for FY15, BPMB fell into the red with RM12.7 mil losses versus a net profit of RM124.7 mil in FY14. The losses 
were blamed on a significant drop in charter hire income, higher loan impairments, advances and financing. 

In FY15, the bank provided loan financing of RM3.2 bil to its four mandated sectors – O&G, technology, maritime and infrastructure. Its long-term target is to disburse RM6.9 bil in FY18.


Agrobank

Agrobank was created to provide finance and banking services with a focus on the agriculture sector. 

It is a continuity of the old Bank Pertanian Malaysia which was founded in 1969 to provide credit assistance to farmers. It then had only two branches in Alor Setar, Kedah and Kota Bharu, Kelantan. 

Today, Agrobank operates 186 branches nationwide and offers customers a host of products and services, including savings facilities, banking instruments, takaful, financing and advisory services.

The bank is owned by MoF Inc. Its financing of the agriculture sector is guided by a policy created by the Ministry of Agriculture and Agro-based Industry. 

Tan Sri Mohamad Zabidi Zainal has been chairman since July last year. 

Datuk Wan Mohd Fadzmi Wan Othman was appointed president and CEO on June 11. In May, he was awarded the Outstanding CEO of the Year by the Association of Development Financing Institutions in Asia and the Pacific.

However, FocusM understands he is not renewing his contract when it expires. 

In FY16, Agrobank’s income rose 9.8% yoy to RM644.8 mil from RM586.9 mil, and bottom line grew 13.9% to RM136 mil.


AMMB Holdings Bhd

AMMB Holdings is the sixth largest banking group with a market capitalisation of RM15.01 bil.

Founded in 1975 as Arab-Malaysian Development Bank, it was acquired by Tan Sri Azman Hashim in 1982. He has been chairman since and owns a 13% stake.

The group’s largest shareholder is Australia and New Zealand Banking Group Ltd with 24%. 

AMMB is led by group CEO Datuk Sulaiman Tahir who joined in November 2015. He is also AmBank (M) Bhd CEO. 

In June, AMMB and RHB Bank Bhd entered into merger talks. If successful, the new group would be the fourth largest bank by assets. Both parties are expected to decide whether to proceed with the merger by end-August or early September.

In FY17 ended March 31, AMMB’s revenue slipped to RM8.3 bil from RM8.4 bil, but net profit was up marginally to RM1.41 bil from RM1.4 bil. 

Alliance DBS says AMMB’s FY17 earnings were in line with expectations and maintains its FY18 earnings forecasts. It has a hold rating on the group. 


RHB Bank Bhd

RHB Bank was founded in 1997 via the merger of Kwong Yik Bank Bhd and DCB Bank Bhd, in what was then the third largest financial service group.

Today, RHB Bank is the fourth largest banking group. It assumed the listing status of RHB Capital Bhd to become a financial holding company. 

It is led by chairman Tan Sri Azlan Zainol and group MD Datuk Khairussaleh Ramli. 

In June, RHB Bank and AMMB Holdings started merger talks. Analysts say the merger will likely be an all-share transaction, with RHB Bank issuing new shares to acquire AMMB’s assets and liabilities.

If a deal is made, it would cement the bank’s position as Malaysia’s fourth largest bank.

An MIDF Research report on the merger opines “all things considered, we are positive on the proposed merger as it will create a stronger banking group, which we believe will be able to compete with its peers more effectively. We also estimate that it will be beneficial to shareholders.” 

However, given lack of detail, it maintains its neutral call on the counter.


Malaysia Building Society Bhd

The origins of Malaysia Building Society Bhd (MBSB) can be traced back to the Federal and Colonial Building Society Ltd, incorporated in 1950. 

MBSB was listed in 1972. The EPF is its major shareholder with a 65.2% stake. 

Its chairman is Tan Sri Abdul Halim Ali who has led the group since 2001. Datuk Seri Ahmad Zaini Othman has been president and CEO since 2009. 

In June last year, MBSB announced it was seeking Bank Negara’s approval for its proposed merger with Asian Finance Bank Bhd, and talks began last December.

In Q1FY17, MBSB posted lower revenue with top line falling to RM811.2 mil from RM812.63 mil in the previous corresponding quarter. However, net profit soared 188% yoy to RM101 mil from RM35 mil.

MIDF Research attributes the strong earnings to higher gross loans, lower cost of funds and allowances for impairment losses. 

“We were pleasantly surprised by the strong growth in earnings and loan book. We believe this loan book growth momentum will be carried over 
to FY18,” it says. Given the better outlook, the research house has upgraded its rating to buy on 
the counter. 



This article first appeared in Focus Malaysia Issue 244.