End of an era in banking

  • Banking
  • Saturday, 06 Oct 2018

FILE PHOTO: Malaysias CIMB Chairman Nazir Razak reacts at the launch of the report Re-drawing the ASEAN Map: How companies are crafting new strategies in Southeast Asia in Kuala Lumpur January 14, 2015. REUTERS/Olivia Harris/File Photo

WHEN 1Malaysia Development Bhd (1MDB) was in the process of being set up, Datuk Seri Nazir Razak (pic) had already warned his brother of the dire consequences of setting up another sovereign wealth fund in Malaysia.

In fact the biggest obstacle for Low Taek Jho, better known as Jho Low in 2009, was Nazir. Jho Low feared that Nazir would put a stop to the first fund raising by 1MDB of RM5bil that was completed sometime in September that year.

CIMB Bank, which was already a top investment bank, stayed away from the first 1MDB deal to raise RM5bil and subsequent deals that the beleaguered fund had undertaken.

When international bankers such as Goldman Sachs and later on Deutsche Bank courted 1MDB for deals, CIMB kept away. It was because of a conscious decision that Nazir took as the chief executive of the bank.

Prime Minister Tun Dr Mahathir Mohamad became a staunch critic of 1MDB only in September 2014.

The facts will show that Nazir was the staunchest critic of the fund even as early as June 2009, easily five years before the current prime minister took up the fight against 1MDB.

To assume that Dr Mahathir and others in the government today did not know of the existence of 1MDB and its suspicious transactions before 2014 is akin to an insult to their intelligence.

Everybody knew that everything was wrong about 1MDB right from mid-2010. It was already being reported.

However, Nazir was about the only person within the establishment that voiced out publicly against 1MDB and its activities. In public talks and conversations in social gatherings, Nazir staunchly opposed 1MDB.

It continued until 2015 when news broke out that Nazir was among many who received funds from his brother, Datuk Seri Najib Tun Razak, in the run-up to the 2013 General Election (GE13). Two years later, the funds were traced to 1MDB, based on details disclosed by the US Department of Justice,

Nazir admitted receiving some RM28mil (US$7mil then) into his account from Najib, the Umno president before the GE13. The instructions were to facilitate the handover of the funds to several people who would be liasing with him.

In 2013, nobody had the slightest idea that the money could have come from funds raised by 1MDB. Even Dr Mahathir, was campaigning for Barisan Nasional in Kedah.

Nazir was cleared by an internal inquiry. The current Attorney General Tommy Thomas was involved in the inquiry while the current Bank Negara governor Datuk Nor Shamsiah Mohd Yunus was at the central bank then supervising financial institutions.

The banker, who spent 29 years building the banking group, will leave ahead of his full tenure that ends in August next year.

The departure of Nazir is the end of an era for banking. He is one of the best-known deal-makers and bankers the country has known since the days of Tan Sri Rashid Hussain.

Rashid built RHB Bank from a stock broking firm to what it is today. He had to leave the bank in 2002 after it was taken over by Utama Banking Group of Sarawak.

Just like Rashid, Nazir built his career as an investment banker and deal-maker before going on to head the banking group.

He joined CIMB instead of Arab Malaysian Merchant Bank, which was the top investment bank in the country then, in 1989. Three years later, CIMB Investment Bank got the mandate to list Tenaga Nasional Bhd – the biggest deal then – raising RM3.2bil.

That deal attracted a host of international investment banks and catapulted Nazir to the top league.

Until 2006, Nazir focused on the investment bank and positioned it to take advantage of the changing appetite in the Malaysian capital markets.

After the boom time for initial public offerings (IPOs) in the 1980s, Malaysia’s stock market was ripe for a good run. By 1989, CIMB Group had purchased a stock broking firm to take advantage of the secondary equities market.

The timing was right. In 1993, Malaysia had its best bull-run and CIMB positioned itself to take advantage.

After 2000, CIMB Investment Bank focused on the bond markets, which was the key revenue earner for the banking group for the next 10 years.

Nazir was instrumental in the listing of the investment bank in 2003. Three years later Bumiputra Commerce Bank took CIMB private as the group, then known as Commerce Asset Holdings Bhd, became a universal bank.

By January 2006, the group was known as CIMB Group and Nazir was firmly the face of the financial institution. In the same year, the group took over Southern Bank, a tough deal that saw Nazir pit his skills against Tan Sri Tan Teong Hean.

By then, Nazir could put together deals that not many were able to carry forward.

One of it was the merger of all the plantation and property companies under Permodalan Nasional Bhd (PNB) into Sime Darby Bhd. Other investment banks looked at it but could not get it approved by the powerful PNB, headed by Tun Ahmad Sarji, then.

There is a view that CIMB Investment Bank benefited from the merger with its huge fees at a cost to Sime Darby and its shareholders.

However, there is another view that the merged entity would not have suffered had PNB appointed the best people and adopted meritocracy to manage the large group.

During Nazir’s tenure, CIMB was aggressive in going regional, acquiring GK Goh and later PT Lippo Bank of Indonesia. However Nazir wanted to go beyond Asean.

In this respect, CIMB Investment Bank acquired the Asia-Pacific arm of RBS of Scotland in 2012 for close to RM850mil. Nazir wanted to shape the group as the Goldman Sachs of Asia.

But the RBS deal was a costly foray. Deal flows did not come as much as was expected and it dragged down the group. Eventually Nazir became chairman in September 2014, leaving the position to Tengku Datuk Seri Zafrul Aziz.

The 2013 transactions involving funds from 1MDB is a blip in Nazir’s career.

But what about the countless times he spoke out against the fund since 2009. What about the behind-the-scene lobbying he did with politicians from both sides of the fence to stop 1MDB?

To be fair to Nazir, it should not obliterate his role as one of the prime movers responsible for building CIMB to what it is today.

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