By Doreenn Leong
PROMINENT former banker Tan Sri Abdul Rashid Hussain could be planning a comeback to the banking scene with talk of him eyeing a stake in the Employees Provident Fund (EPF)-owned Malaysia Building Society Bhd (MBSB).
Sources say talks are still preliminary as Bank Negara Malaysia’s (BNM) approval is needed for both parties to proceed with negotiations. BNM has not responded to FocusM at the time of writing.
When asked, EPF did not confirm nor deny such talks.
“The EPF’s investment activities are guided by our strategic asset allocation and this strategy is reviewed every three years to ensure that we can optimise returns within our tolerable risk limits.
“The EPF’s acquisition or sale of any asset, including equities, will really depend on the fundamentals and attractiveness in terms of valuation. Our mandate is to safeguard our members’ savings while helping them achieve a better future,” the fund tells FocusM via email.
EPF has a huge exposure in banking stocks as it owns some 64.5% stake in MBSB, 42.7% in RHB Bank Bhd and 15.5% in CIMB Group Holdings Bhd.
The fund has over the years been trying to merge its banking interests. CIMB, RHB Capital Bhd and MBSB had in July 2014 announced an intention to merge but had aborted discussions on the proposed merger in January 2015
Then on Feb 2, 2016, MBSB announced that its proposed merger with Bank Muamalat Malaysia Bhd had been aborted.
Even as far back as in 2006, there were speculations that Pos Malaysia Bhd was keen to acquire a controlling stake in MBSB.
It was said that EPF would want to move back to being an investor and not as a manager in MBSB.
The fund would not likely sell its stake at less than MBSB’s net assets per share of RM1.31 as at Dec 31, 2019. But with the current share price hovering around 65 sen, it may be challenging for potential investors to cough up more than this. MBSB’s market capitalisation stood at RM4.15 bil as at May 6.
EPF may adopt a similar model for MBSB as property developer Malaysian Resources Corp Bhd after it acquired a 66.2% stake in 2010.
In 2013, Tan Sri Mohamad Salim Fateh Din, via his private vehicle Gapurna Sdn Bhd, acquired a 16.6% stake in MRCB and became the second-largest shareholder after the EPF. Salim was helming the company as its group managing director until he passed the baton to his son Mohd Imran Mohamad Salim on July 2, 2018.
For Rashid, as an individual, he can only hold up to 10% under the Financial Services Act, 2013. He can probably go in as an institutional shareholder if he wants to own more than 10%.
For a financial holding company, the company must first obtain written approval of the Finance Minister and require approval by BNM to hold more than 50% in a licensed institution.
The other institutional shareholders of MBSB are CIMB with a 2.73% stake and Tan Sri Chua Ma Yu’s CMY Global Ltd with 1.94%. Chua raised his stake in MBSB to 8.97% from 6.06% in August 2016 via subscription of the company’s rights issue. CMY still had 8.14% as at March 29, 2019 but ceased to be a substantial shareholder on May 16, 2019.
Incidentally, former stockbroker Chua’s business ties with Rashid go back a long way. They founded Rashid Hussain Securities.
Chua disposed of his stake in Rashid Hussain Securities in 1992 when the brokerage had not yet transformed into a bank.
Meanwhile, Rashid, 74, who founded the RHB Group, was forced to give up control when he ran into financial difficulties during the 1997/98 economic crisis.
At that time, he had a 23.7% interest in Rashid Hussain Bhd, which in turn controlled 55% of RHB Capital Bhd, which housed RHB Bank Bhd, RHB Sakura Merchant Bankers Bhd and stockbroking firm RHB Securities Sdn Bhd. Under his stewardship, RHB Securities became one of the leading stockbrokers in Malaysia.
However, a huge debt burden had compelled Rashid to relinquish control of Malaysia’s third-largest financial-services group to the government.
It was reported in the Wall Street Journal that he had aggressively given out loans to politically connected companies such as Rekapacific Bhd, which was controlled by the son of former transport minister Tun Ling Liong Sik and businesses related to Tan Sri Halim Saad.
The financial crisis had caused these companies to run into difficulties and could not meet their loan obligations.
It was RHB Bank’s takeover of scandal-hit Sime Bank Bhd that caused Rashid’s downfall.
Many were puzzled by Rashid’s move to take over Sime Bank as the deal came just months after his bank completed the takeover of Kwong Yik Bank Bhd for RM2.2 bil. Also, it was unclear how Rashid would raise the estimated RM1.2 bil needed to recapitalise Sime Bank.
At the end, Danamodal Bhd had to step in after several failed attempts to raise the recapitalisation funds, injecting some RM1.3 bil into the merged RHB-Sime Bank, effectively diluting Rashid’s holdings in the banking group. – May 6, 2020
