WHILE expressing satisfaction with AMMB Holdings Bhd’s rationale with regard to the banking group’s proposed private placement of shares and impairment of goodwill, the Institutional Investors Council Malaysia (IIC) is adamant that “necessary action should be taken to investigate the issues that put AMMB under the current situation.”
Additionally, IIC also insists that AMMB explore ways to recover the losses faced by the bank from those parties guilty for not acting in the best interest of the banking group, according to the council’s advisor Lya Rahman.
Recall that AMMB has to pay pay RM2.83 bil – dubbed “mother of all fines” – to the Malaysian Government as global settlement in relation to its involvement in the 1Malaysia Development Bhd (1MDB) scandal.
A RM2.83 bil will be reflected in the banking group’s 4Q FY2021 results while it will not be proposing any final dividends for the year ended March 31, 2021.
The IIC’s membership is made up of 24 institutional investors and 35 signatories comprising asset owners and asset management companies in Malaysia.
The prominent institutional investors in AMMB include the Employees Provident Fund (10.7% equity stake as of April 7), Permodalan Nasional Bhd (8.53%) and Kumpulan Wang Persaraan (2.12%).
“We expect action to be taken at both the board level and management level with no one to be spared whether they are still with the company or even those have left the company,” Lya told FocusM.
For the record, IIC had another engagement session with the senior management of AMMB last Friday (April 2) on the proposed placement of shares and the impairment of goodwill.
With regard to concerns raised on its proposed share placement exercise, Lya said IIC is satisfied with AMMB’s rationale for undertaking the placement instead of rights issue amid concerns that the dilution effect of the latter will be detrimental to minority shareholders.
“However, we have to accept that this approach is a better option after hearing the explanation from the management of AMMB,” she justified.
“The placement of shares seemed to be the most suitable as some of the major shareholders are not likely to invest further as either they are fully invested or they have already own shares within the capped limit by Bank Negara Malaysia (BNM).”
Under existing BNM’s rules, shareholding of more than 5% by a single shareholder would require the central bank’s approval. Moreover, there are also the risks of the rights issue not being taken up by the minority shareholders.
“The AMMB Management also mentioned that they have approached several investors to participate in the placement of shares,” Lya pointed out.
“We also voiced our concern that this placement exercise should be undertaken in a transparent manner without undermining the governance process.” – April 8, 2021
Photo credit: Nur Ismail Photography