Nazir: Selling more than 51% in bad bank would be nice
KUALA LUMPUR: CIMB Group Holdings Bhd, the country’s second largest bank by assets, will update investors on its plans to sell a stake in its bad-debt unit in August, said chief executive officer Datuk Seri Nazir Razak.
“We will do the update when we announce our second-quarter earnings in August,” he said after the group’s EGM yesterday.
News reports had it that CIMB Bank Bhd was in talks with several specialist parties to sell down its stake in its “bad bank” Southeast Asia Special Asset Management Bhd (Seasam) that managed its legacy non-performing loans (NPLs).
“Logically, we would like to deconsolidate Seasam. (Selling) more than 51% would be nice,” Nazir was quoted saying.
Datuk Seri Nazir Razak says CIMB is also looking at the possibility of setting up a similar ‘bad bank’ for its Thai business.
A wholly owned unit of CIMB, Seasam is a special-purpose company that holds gross loans amounting to RM8.4bil and has a net book value of RM928mil.
The majority of the NPLs originated from the retail consumer segment and some dated back to the late 1990s, and while the portfolio had been written down to RM928mil, the total value of the collateral was estimated to be RM2.1bil.
CIMB Bank inherited about RM14bil in legally claimable bad debts from its predecessor banks Bumiputra-Commerce Bank and Southern Bank with a net book value of RM4.8bil, Nazir said the group was looking at the possibility of setting up a similar “bad bank” for its Thai business, where CIMB Thai had a bad-debt value of RM300mil.
Meanwhile, Nazir said the group had received approval from its shareholders to acquire 19.67% stake in PT Bank CIMB Niaga TBK (CIMB Niaga) for RM1.9bil from Khazanah Nasional Bhd via the issuance of new shares.
“Once done, our stake in CIMB Niaga will increase from 78% to 98%. At the moment, Khazanah has confirmed to sell 17.1% of its shares and a further 2.6% will be decided in September,” he said.
Nazir said the exercise would enable the group to further strengthen its position in Indonesia as it would provide more avenues to capitalise on the opportunities presented by both the prospects of the Indonesia banking sector and strong economic fundamentals of the country.
“We are bullish on the growth prospects in Indonesia as we expect by 2015, Indonesia can be one of our largest profit contributors,” he said.
He added that in the first quarter ended March 31, 2010, CIMB Niaga contributed 37% to the group’s profit while the return on investment stood at 18%.
“We will expand operations in Indonesia particularly in the micro finance and auto finance segments. In terms of loan growth, I think CIMB Niaga should do more than 20% this year. However, our challenge moving forward is to ensure that deposit-based growth is in tandem with the loan growth,” he said.
CIMB Niaga is currently the fifth largest bank in Indonesia in terms of assets after the merger between PT Bank Niaga Tbk and PT Bank Lippo Tbk last year to comply with the Indonesian central bank’s single-presence policy.
CIMB Niaga’s strength has been in mortgage loans, in which it currently has the second largest market share.
As at Dec 31, 2009, its total loan amount went up by 11% to 82.8 trillion rupiah, with auto loans growing 38% year-on-year to reach 8.6 trillion rupiah.