This article first appeared in The Edge Malaysia Weekly on April 22, 2024 - April 28, 2024

BOARDROOM changes are likely afoot at Affin Bank Bhd. Sarawak, which is awaiting regulatory approval to become the largest shareholder in the banking group, is said to be seeking two seats and chairmanship of the board.

“It wants representation via two board seats and the chairmanship,” a source tells The Edge.

Sarawak is understood to be hopeful that Bank Negara Malaysia will revert on its plan to increase its shareholding in Affin Bank to around 30%, from 4.8% currently, in the next few weeks.

According to sources, the state hopes to nominate Tan Sri Abdul Aziz Husain, the current chairman of Sarawak Economic Development Corp (SEDC), as chairman of Affin Bank.

It remains to be seen whether it will get its way. Industry sources point out that Bank Negara is likely to want Affin Bank to have an independent chairman.

As it stands, only three of the country’s eight banking groups have a non-independent chairman. Malayan Banking Bhd’s Tan Sri Zamzamzairani Mohd Isa is a non-independent non-executive chairman, as is RHB Bank’s Tan Sri Ahmad Badri Mohd Zahir and Hong Leong Bank Bhd’s Tan Sri Quek Leng Chan.

Abdul Aziz, who is in his early 70s, is a prominent figure, having served the Sarawak government in various capacities since 1973, including as state secretary from August 2000 until his retirement in December 2006. He is also chairman of Sarawak Skill Development Centre and Eksons Corp Bhd, a timber and property development group.

Affin Bank currently has 11 board members, led by independent non-executive chairman Datuk Agil Natt, who is also in his early 70s. The independent directors are Datuk Abdul Aziz Abu Bakar, Datuk Mohd Hata Robani, Datuk Rozalila Abdul Rahman, Gregory Fernandes, Chan Wai Yu, Marzida Mohd Noor and Emeliana Dallan Rice-Oxley; the non-independent directors are Ignatius Chan Tze Ching, Yuen Peter Wai Hung and Mohammad Ashraf Md Radzi.

Agil, who has a strong banking background — he is a former deputy president/executive director of Malayan Banking Bhd — came on board as Affin Bank’s chairman in November 2019. It was widely known in the industry that he was brought in to help clean up the bank’s books and whip the lender into shape. At the time, Affin Bank was plagued with a multitude of issues, including weak asset quality mainly from legacy loans.

The bank, following a management revamp and a transformation strategy, has since gone on to show vast improvement. Its gross impaired loan ratio, an indicator of asset quality, improved to 1.9% as at end-2023, from about 3% in 2018.

To be sure, any proposed changes to the board will require Bank Negara’s approval. For now, however, there is much anticipation as to when the central bank might give the green light for Sarawak’s plan to raise its shareholding in the bank.

The bank’s share price, which hit a more than five-year high of RM2.67 on March 3, has gained 16.8% this year to close at RM2.43 last Friday (April 19) as investors bet that Sarawak’s impending entry as a significant shareholder would add value to the bank. At RM2.43, Affin Bank has a market value of RM5.7 billion.

On Jan 31, The Edge reported, citing sources, that Sarawak intended to raise its shareholding in Affin Bank to around 30%, which would make it the banking group’s largest shareholder. At present, the biggest shareholder is the Armed Forces Fund Board (LTAT), with a 28.79% stake.

It is understood that Sarawak plans to acquire Boustead Holdings Bhd’s entire 20% equity interest in Affin Bank as well as part of LTAT’s stake in a bid to raise its shareholding to just below the 33% level at which a mandatory general offer would have to be triggered. Currently, the bank’s second largest shareholder is Hong Kong-based Bank of East Asia Ltd, with a 23.93% stake.

On April 17, the Employees Provident Fund (EPF) ceased to be a substantial shareholder of Affin Bank after disposing of three million shares in the group.

Affin Bank reported a net profit of RM39.54 million for the final quarter of the financial year ended Dec 31, 2023, which was more than double the RM16.56 million it made in the same period a year earlier, thanks to a sharp decline in provisions and lower taxes. For the full year, however, profit fell 66% to RM402.19 million.

It recently transitioned to a new strategy codenamed AX28, from A25 previously, under which it aims to reach a profit before tax of RM1.2 billion by end-2025 and RM1.8 billion by end-2028, from just RM518 million last year.
 

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