New SDBank board lodges MACC report over RM5bil in bad loans

KOTA KINABALU: A revamp is on the cards for state-owned Sabah Development Bank (SDBank), with graft busters asked to look into issues involving loan issuances in previous years.

State Finance Minister Datuk Seri Masidi Manjun said the new SDBank board and management lodged a report with the Malaysian Anti-Corruption Commission (MACC) in April over alleged abuse in loan issuance.

He said the bank management was also bracing to post real losses for last year and this year.

“When the new board was appointed in July last year, SDBank was in a dire financial position.

"The real numbers for non-performing loans (NPLs) were sky high, funding was inadequate to meet maturing bond obligations, and recovery actions were passive and slow,” he said in the state assembly on Wednesday (July 10).

He told Datuk Seri Mohd Shafie Apdal (Warisan-Senallang) that a division has been set up within the SDBank led by a qualified recovery specialist to aggressively recover the NPLs.

Earlier during the assembly meeting, Masidi had said the NPLs amounted to RM5bil.

“As at the end of June, legal action has been initiated on all 43 NPLs.

"The new board has set a KPI (key performance indicator) of RM1bil NPL recovery per year for the next three years, and will no longer entertain loan applications from Peninsular Malaysian companies,” he said.

He explained that the total amount of loans approved to companies in Peninsular Malaysia from 2003 to 2018 was RM8bil, with 95% in the property development sector in Kuala Lumpur, Selangor and Johor.

Masidi stressed that the new team is "taking the bull by the horns” by conducting a rigorous and thorough review on the bank’s operations by enhancing policies and standard operating procedures (SOPs), adopting financial sector best practices and Bank Negara Malaysia guidelines.

“It has also reclassified loans into NPLs as they correctly should be. As of July last year, the NPL was 47% and by end May this year, it was 75% (of total loans issued by the bank).

“With the support of the state government, the new board and management have been able to resolve the bulk of legacy government-linked company (GLC) loans, and with these repayments, the bank has been able to reduce its bond obligations,” he said.

In September last year, the borrowings of the bank stood at RM5bil, and the new management had reduced it to RM3.9bil by the end of May, he added.

“One of the high-profile GLC legacy loans is the huge Sabah International Petroleum (SIP) loan with SDBank.

"SMJ Energy acquired SIP and used the cheap sukuk fund to settle RM700mil in SIP debt to SDBank, thus achieving interest savings of RM60mil for 2024 alone.

“At the same time, this debt payment allowed SDBank to settle its bond repayment obligations without rolling over, resulting in RM35mil in interest savings per year.

He said the new team had been given a mandate to pursue only development projects that are economically and socially meaningful and environmentally responsible in Sabah.

“SDBank rejected RM1.5bil in loan applications in the first five months of this year (in keeping with) this mandate and to meet the bank’s new stringent credit test," he added.

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