EVER SINCE RHB Sakura Merchant Bankers Bhd was de-listed from the local stock exchange late last year and taken private, the bank has witnessed a host of management changes. It is a fresh new chapter for the merchant bank but one without two key people former managing director George Ratilal and former owner Tan Sri Abdul Rashid Hussain.
For years, these two men have been so commonly known as the face of RHB Sakura and the ones who steered the merchant bank to top position in the country's corporate deals.
While the changes in management are nothing new considering the merchant bank, together with other entities under the RHB banner have come into the hands of the Utama Banking Group (UBG) as a result of an industry-wide consolidation, industry observers are keen to see how these changes will pan out for the merchant bank, which has emerged a force to be reckoned with in the banking circles after handling some of the illustrious initial public offerings (IPO) and corporate deals.
Of interest is who will fill in the gaps in RHB Sakura's senior management positions. No doubt, as most expect, the top brass from parent UBG with political links in Sarawak will enter the picture.
It will be interesting to see who they have identified as the new CEO (chief executive officer) to lead the merchant bank. The new head of RHB Sakura would have his or her own strategy to move the bank forward. Definitely, having shareholders with strong political clout helps, says Rating Agency Malaysia Bhd financial institution ratings head Meor Amri Meor Ayob.
Between now and then, however, is what some are concerned about. One market observer says the transition may cause the merchant bank to lose momentum and pave the way for rivals to forge ahead. The threat of aggressive and well-reputed Commerce International Merchant Bankers Bhd, which only recently made its debut on the Kuala Lumpur Stock Exchange, swooping in to fill in the vacuum certainly cannot be easily dismissed.
To quote an industry observer: Like in any other industry, any management change in a company gives its competitors a chance to grow. None of the initial public offers (offerings) we have seen so far this year have featured RHB Sakura's name. Rather, these have been handled mostly by Am Merchant Bank Bhd and Commerce International Merchant Bankers Bhd (CIMB). Could this be a telling sign?
A banking analyst has this to add: There will certainly be some impact in terms of deal-generation on RHB Sakura's part as the banking sector is known to be very contact-driven. Apart from technical expertise, a lot also depends on relationships.
In the case of RHB, the whole group is undergoing sweeping changes following its merger with UBG, which was completed early this year. Thus, while the group was previously a very entrepreneurial entity, it now has to deal with amalgamating itself to well-connected UBG.
RHB Sakura was taken private as part of a restructuring of the group to facilitate the merger of the banks. RHB Sakura is now a wholly-owned subsidiary of RHB Capital Bhd.
Apart from Abdul Rashid (who has stepped down as chairman of RHB Sakura and relinquished all his other positions in the group) and Ratilal, another key personality who has left the group is RHB executive director Chartchai Pusavat.
According to a research head, those that have left the company were considered to be the movers and shakers in the banking industry. So, it's really not surprising if clients have intentions of moving on or have reservations about signing on with the new team of top UBG personnel, he says.
Over and above that, it also remains to be seen what the remaining members of the senior management team will do.
Generally, observers say the moves UBG will take to reposition the group will very closely be watched. They are taking over a group that has been held in very high esteem in the past in not just one but practically all sectors of the banking field, from commercial to merchant banking and stockbroking. It'll definitely be a tough act to follow but UBG should be given a chance to prove itself, a banking analyst says.
Although RHB Sakura lost some ground during the Asian financial crisis, it more than regained its footing last year when it played a key role in the country's two largest IPOs - Maxis Communications Bhd and PLUS Expressways Bhd.
As a result, it turned in a significantly stronger profit for the April to June 2002 quarter. This came on the back of an almost four-fold jump in non-interest income.
In terms of the value of corporate debt issues done last year, again the merchant bank was not to be outdone. It figured in the top spot of RAM's league table of lead managers, together with Bank Muamalat Bhd and KAF Discounts Bhd, as part of a consortium that had structured public debt securities (PDS) amounting to RM5.1 billion.
On an individual basis, RHB Sakura again emerged as RAM's top lead manager for 2002 with the amount it lead-managed being 62 per cent higher compared to the previous year's RM1.7 billion. On its own, it brought RM2.76 billion worth of PDS to market thus capturing more than 15 per cent of the market.
While others are saying it is unlikely that RHB Sakura will be able to repeat the feat it performed last year in the IPO market what with the IPO fever having tempered down significantly in recent months and the global economic environment looking so uncertain, RAM is still sanguine about the merchant bank's prospects.
In December last year, it reaffirmed the bank's long- and short-term general bank ratings at A2 and P1 while RHB Sakura's proposed RM165 million subordinated bond issue was assigned a long-term A3 rating.
According to RAM, the ratings reflect RHB Sakura's overall resilient fundamentals and franchise as well as its sustainable financial performance despite the challenging business environment last year. Going forward, it expects the bank's asset quality to improve in the year to June 2003 period.
Meor from RAM admits that for a merchant bank, the key driver is management. However, he claims that although changes in top management will undoubtedly create a temporary shock to the business franchise of RHB Sakura, it will not necessarily lead to a loss in the bank's ability to generate business.
Important to note when rating financial institutions, he adds, is that profitability is not the only indicator that dictates its rating. Equally significant is an institution's level of capitalisation, funding and liquidity, asset quality as well as risk management, which in RHB Sakura's case, is sufficient at the current rating of A2.
As far as RHB Sakura's track record is concerned, it has a good treasury team that is able to generate a sufficient amount of income to buffer against any adverse drop in its fee income. We feel the bank's business generation capabilities remain intact, he says.
But even as the bank basks in the knowledge of accolades piling on, it can hardly ignore the fact that its lead position is hardly cast in stone. Undoubtedly, its most formidable opponent currently is CIMB.
In RAM's book, the recently listed merchant bank has managed to stand among the top five lead managers over the past five years.
For 2002, CIMB took second place in the rating agency's league table, having lead-managed an equivalent number of issues as RHB Sakura albeit with a value of RM2.02 billion. CIMB's largest deal last year was the RM1.11 billion zero coupon redeemable secured bonds issued by Sovereign Capital Bhd.
In its prospectus, CIMB highlights that since 1990, it has brought the most number of IPOs to market, controlled the league tables for the PDS market and ranked at the top of the earnings table for corporate advisory fees.
With group-wide restructuring taking place at RHB currently, the Commerce group, helmed by Nazir Razak, certainly appears to be in a better position in terms of shareholding and the backing it has. It is possible that some clients are banking on the political connections here and thus want to be aligned with the Commerce group, an observer says.
But to be fair, a research head reckons that UBG should be given the benefit of the doubt with regard to changes likely to occur group-wide as it has only been about a month since it took over Rashid Hussain's stake in the RHB group. It is early days yet as UBG is only now coming in at the top level, she says.
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