The open spat between the senior directors of Alliance Bank Malaysia Bhd and its chief executive Datuk Bridget Lai has puzzled observers, with some describing it as a highly embarrassing end to what until now had seemed like a good banking fairy tale.
It was just five years ago that Alliance Bank, which has had a few reincarnations and ownerships in the last 10 to 20 years, was set to be on its way to becoming a significant, albeit small, banking player in Malaysia.
That was when the Singapore government’s investment agency, Temasek Holdings, acquired a controlling stake in the bank and hired Lai, a highly regarded banker from Standard Chartered Bank, to run Alliance Bank as well as its holding company, listed Alliance Financial Group Bhd (AFGB).
Expectations were high and despite the many challenges and difficulties, analysts said Alliance Bank had done reasonably well as shown by its profit track record in the last few years (See tables for profit track record of Alliance Bank and AFGB).
Lai brought in a group of bankers, mainly from Standard Chartered, into Alliance and very quickly turned things around.
Alliance Bank was formerly called Multi-Purpose Bank and before that Malaysian-French Bank. Its parent AFGB was previously called Malaysian Plantations Bhd, which took on banking businesses after a complex restructuring in Multi-Purpose group.
The bank has had a chequered history, often linked to politics. For example, in the mid-1980s it was part of a controversial swap deal involving the then United Malayan Bank Corp Bhd (UMBC) and two politicians — Tun Daim Zainuddin of Umno and Tan Koon Swan of MCA.
Multi-Purpose subsequently came under the control of Datuk Lim Thian Kiat in 1989. In 1999, he sold out after Datuk Seri Anwar Ibrahim was sacked from Umno and the government. Lim was seen as an Anwar backer.
In 2000, when the government and Bank Negara Malaysia forced a consolidation of the banking sector, the then Multi-Purpose Bank was surprisingly chosen as one of the six anchor banks that would take over other banks.
As a result, Multi-Purpose Bank signed merger agreements with seven partners — Danamodal Nasional Bhd, Suria Capital Holdings Bhd, Langkah Bahagia Sdn Bhd (LBSB), Bolton Bhd, Amanah Merchant Bank Bhd, Bumiputra Merchant Bankers Bhd and Sabah Finance Bhd — for the purchase of 60% equity interest in MBf Finance Bhd, Sabah Bank Bhd, International Bank Malaysia Bhd (IBM) and Bolton Finance Bhd.
However, its plans to acquire MBf Finance fell through.
Nevertheless, Multi-Purpose Bank eventually took over the banking operations and assets of IBM, Bolton Finance, Bumiputra Merchant Bankers, Sabah Bank Bhd, Sabah Finance and Amanah Merchant Bank.
Multi-Purpose Bank’s pact with LBSB not only resulted in it acquiring IBM from LBSB, but also saw the emergence of the latter as a substantial shareholder of the bank which was then renamed Alliance Bank.
LBSB was an investment vehicle linked to former finance minister Tun Daim Zainuddin.
By 2004, LBSB was Alliance’s single largest shareholder with a 15.37% stake.
In 2005, Temasek came into Alliance when it acquired LBSB’s stake, but not before a bit of corporate drama.
Businessman Tan Sri Amin Shah Omar Shah had suddenly become a significant shareholder at Malaysian Plantations with a near 20% block and got himself a seat on the board. But whatever his intentions, Amin Shah’s tenure didn’t last long as he was removed as director by several shareholders led by Tan Sri Chua Ma Yu via a special requisition.
The shareholders, who held slightly more than 10% equity interest in Malaysian Plantations, also sought the removal of five directors, including chairman Tan Sri Lim Yan Hai, executive director Wu Sor Hwa and directors Patrick Chin Yoke Chung, Tan Kim Leong and Abdul Sani Busu. All six directors resigned after the short tussle.
It was reported back then that the tussle for control of Malaysian Plantations was effectively a battle to control Alliance Bank.
Temasek finally came into the picture as AFGB (formerly Malaysian Plantations) shareholder in 2005 by buying LBSB’s 15% stake, via a 51:49 JV with LBSB. The JV, known as Verticle Theme Sdn Bhd, upped its stake in the banking group to 30.1%, valuing the stake at RM1.12 billion. Today, the JV owns around 29% of AFGB.
On taking control of AFGB, Temasek not only hired Lai but also installed several prominent retired professionals from both Malaysia and Singapore to its board as well as that of Alliance Bank.
They included accountant Datuk Oh Chong Peng as AFGB chairman and lawyer Datuk Thomas Lee as Alliance Bank chairman.
Other prominent figures include Phoon Siew Heng who was formerly Temasek’s chief investment officer and ex-bankers like Peter Seah and Kung Beng Hong.
However, what was supposed to be a coalition of strength for AFGB has turned into a big clash between these prominent board members and Lai over something that remains bizarre and unclear.
What is certain, however, is that reputations and credibility of everyone involved are being put to a major test.
This article appeared in Corporate page of The Edge Malaysia, Issue 789, Jan 19-24, 2010.