Fund will be back on track soon

  • Nation
  • Wednesday, 12 Dec 2018

KUALA LUMPUR: Lembaga Tabung Haji (TH) has assured depositors the fund will be back on track next year following its restructuring plans involving a takeover of its under-performing assets, said group managing director and chief executive officer Datuk Seri Zukri Samat.

He also expressed confidence that TH will be able to declare some dividends this year.

“I am positive that we can declare some dividends this year but I cannot say for certain. For 2019, TH will be back on track,” he said.

Depositors’ confidence in TH remains strong despite revelations made by Minister in the Prime Minister’s Department Datuk Seri Dr Mujahid Yusof Rawa that TH will be placed under Bank Negara’s supervision beginning January, he added.

Zukri said there was no spike in withdrawals but instead, 170 new TH accounts were opened yesterday itself.

“We welcome the government’s decision to put TH under the supervision of Bank Negara as the central bank has a very robust risk ­management and liquidity framework, which institutions under its supervision must comply with, and therefore enhance confidence of depositors,” he told a press conference here.

Zukri announced yesterday that a special purpose vehicle (SPV) under the Finance Ministry will take over TH’s underperforming assets and will issue sukuk and preference shares totalling RM19.9bil to TH as the purchase consideration, and TH is targeting to complete the exercise by the month’s end and expects the rehabilitation of the assets in seven years.

This includes the 1Malaysia Development Bhd (1MDB) land bought by TH.

Zukri added that TH is also looking into areas where costs of haj operations can be reduced. Cost-cutting measures have also been initiated to reduce overheads.

He also said measures will be taken to strengthen TH’s governance, operations and to refine its business model.

The pilgrims fund board’s risk, audit, governance committee chairman Datuk Zaiton Mohd Hassan said it is still unknown who will head the SPV.

“It will be up to the government to decide. They will engage the experts,” she said.

Zaiton said TH’s plan to transfer its underperforming assets to SPV is not a bailout by the government.

“A bailout will involve the ­government pumping in cash or government guarantees. None of that, none of that,” she said after the press conference on the rehabilitation and restructuring plan of TH.

“This is purely a commercial transaction with the objective to allow these underperforming assets to be unwound in a strategic manner.

“The SPV will engage specialists. It will be up to the Finance Ministry.”

In late 2015, Bank Negara raised the alarm about the state of TH’s finances to then minister in the Prime Minister’s Department Datuk Seri Jamil Khir Baharom.

In a Dec 23 letter to Jamil Khir, who was in charge of religious affairs, the Bank Negara governor during that time, Tan Sri Zeti Akhtar Aziz, warned that TH was paying out dividends and bonuses using its reserves since 2012.

As such, the institution’s declining reserves were not enough to manage the poor equities market performance in 2015.

In the letter, Zeti said the value of TH’s reserves had become negative, and this meant at current market values (in 2015), TH’s assets were not sufficient to meet all its financial obligations.

A footnote included in the letter stated that as at the end of September 2015, the value of the assets was only enough to pay out no more than RM0.96 for every ringgit in liabilities.

Zeti’s letter also warned that in the event of a mass withdrawal, it could cause TH to seek government financial aid in order to fulfil its obligations under Section 24 of the Tabung Haji Act 1995.

The letter said central bank officers had met with TH’s management and proposed that the organisation formulate a reserve policy to strengthen its risk management.

Meanwhile, Zeti, in the letter, also called on Jamil Khir to consider beefing up the board of directors with more members with financial expertise and experience.

Bank Negara sources said the central bank raised the concern to TH because they were looking into the country’s financial stability and the strength of the banking sector.

TH is the major shareholder of Bank Islam, which falls under Bank Negara’s jurisdiction.

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