KEEPING track of the changes at the top of the standalone foreign Islamic finance outfit, Kuwait Finance House (M) Bhd (KFH Malaysia), is not easy.
In its 10 years of operations in Malaysia, it is now into its fourth CEO – last week, a little noticed announcement by the company stated that it had appointed Ahmed S. Al Kharji as its new chief executive officer and managing director effective April 20. The appointment was done without publicity with only a press release posted on the bank’s website on Tuesday.
Al Kharji takes over from Datuk Seri Abdul Hamidy Abdul Hafiz, a veteran banker who resigned last November, about four months before his three-year contract expired.
The Islamic bank had set up shop in Malaysia in 2005 under the liberalisation of the Islamic banking industry.
Notably, the appointment of Al Kharji, a Kuwaiti, has also raised a bigger question concerning KFH Malaysia. Is this move a precursor to a corporate exercise such as a merger and acquisition (M&A)?
“KFH Malaysia is seen by some quarters as a potential takeover target. After all, it has not seen the going easy since its inception in Malaysia ten years ago,” quips a banker. To be fair, the other Middle-Eastern standalone banks in Malaysia, namely Al Rajhi Banking & Investment Corp and Asian Finance Bank (M) Bhd are also facing challeging times due to the fierce competition from Malaysian banks.
Al Rajhi Bank had also seen the departure of its chief executive late last year, a position that has yet to be filled, a check on its website showed.
However, other quarters reckon the bank is here to stay and it is unlikely that the Kuwaitis will sell cheap, that is if it does at all.
This is because Asia still presents huge potential for Islamic finance and Malaysia is often seen as a springboard for expansion into neighbouring countries.
Industry insiders speculate that Al Kharji was brought in as the parent company “wanted one of its own guys to run the show” as Abdul Hamidy’s style of management is believed to have not gone down well with some. Al Kharji is the bank’s second foreign chief after Datuk Salman Younis who had headed the bank since its inception in 2005 until June 2009.
KFH Malaysia – a wholly-owned subsidiary of Kuwait-based Kuwait Finance House – is the country’s first and largest of foreign Islamic lenders.
It’s parent in Kuwait is substantially owned by the Kuwait Investment Authority and listed on the Kuwait Stock Exchange.
However, KFH Malaysia’s initial participation as a financier in high-profile projects, such as the upmarket Pavilion shopping mall in Kuala Lumpur had thrust it into the limelight. It is also this strategy that caused it to run into financial problems when the 2008 global financial crisis struck. Its problems were compounded by talk of mismanagement and lax risk management practices at the bank.
The bank slipped into the red in 2009 and returned to profitability in 2012 after a change in leadership and concerted efforts to clean up the mess. Central to this is a transformation agenda launched in the second quarter of 2012 that aims to grow its investment banking business.
In 2013, in a move to make a distinction between its core banking and investment banking activities, the bank appointed Abdul Hamidy as CEO. Its CEO then Datuk Jamelah Jamaluddin, went on to helm the Kuwait Finance House (Labuan) – the unit that was to have undertaken the group’s investment banking and fee-based activities in the region.
But that plan did not happen with the departure of Jamelah, who was KFH Malaysia’s second CEO from February 2010 till March 2013.
Following Jamelah’s departure, the investment banking business again came within KFH Malaysia. In February last year, the bank appointed T. Jeyaratnam, a seasoned investment banker, as its new head of investment banking, but it is learnt that he has recently left.
With a change in leadership, the bank’s transformation has come into focus. Over the past 1½ years, Abdul Hamidy has been making inroads in transforming the bank by among others, institutionalising its processes and systems to ensure a better governance culture.
In an interview with StarBizWeek last year, Abdul Hamidy said the transformation will create a robust structure that will see the bank’s credit management team working independently from the rest of the business.
Asked on the bank’s direction, KFH Malaysia says given that Al Kharji took over the helm of the bank less than two weeks ago, he is “principally focused on getting to know the management and staff of the bank as well as integrating himself within our business and operations at this current stage. Therefore, the bank continues to operate on a business as usual basis.”
Al Kharji, who holds a Master of Business Administration from the University of San Diego, California, is not new to the Malaysian banking scene. He has been a director of KFH Malaysia since June 2014. The bank’s press release announcing its appointment stated that “he is expected to play a key role in strategically propelling the Malaysian chapter into a new phase.”
According to the group’s 2014 annual report, the corporate and commercial segment is the major contributor of the bank’s financing and investment assets portfolio at 69%, while consumer is next at 31% as at end-2014. Its total assets as at financial year ended Dec 31, 2014 (FY2014) stood at RM10.47bil.
The bank said it posted a moderate financing growth of 10.2% in 2014 in view of the cautious approach adopted in the business strategy with emphasis on asset quality. Net profit for FY2014 came in at RM92.82 mil, down from RM97.74mil previously.
As for business plans for 2015, it said the focus will be on on three strategic thrusts, namely quality and sustainable assets, business growth, resources and capabilities. It also expects better performance in 2015.