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Sabahans RM5 billion poorer due to SDB: 75pc of non-performing loans given to peninsula firms before GRS government took over
Published on: Thursday, July 11, 2024
By: Bernama
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Sabahans RM5 billion poorer due to SDB: 75pc of non-performing loans given to peninsula firms before GRS government took over
Masidi at the State Assembly proceedings yesterday.
Kota Kinabalu: State-owned Sabah Development Bank (SDB) approved RM8 billion in loans from 2003 to 2018 to Peninsular Malaysian companies primarily involved in real estate development in Kuala Lumpur, Selangor and Johor, said Sabah Finance Minister Datuk Seri Masidi Manjun.

Masidi said the names of the companies and their owners cannot be disclosed due to SDB’s confidentiality obligations to the borrowers in accordance with the Financial Services Act (FSA) 2013. 

“Due to legacy issues, SDB will be announcing unprecedented losses for the financial year (FY) 2023 and likely FY2024 in line with best practices and accounting standards,” he told the State Assembly.

He was responding to Datuk Seri Mohd Shafie Apdal (Warisan-Senallang), who asked how much of the RM3.1 billion in unpaid loans given by SDB to borrowers from Peninsular Malaysia since 2001 was approved between 2003 and 2018.

He also inquired about the types of businesses, the names of the company owners, and the states involved.

Masidi said the financial losses were due to creative accounting, under-provisioning and governance meltdown, among others.

“The quality of existing loan assets is poor; out of the RM6.6 billion loans portfolio as at end-May 2024, 75 per cent or RM5 billion are Non-Performing Loans (NPLs),” he said.

Masidi said an asset management company (AMC) led by a highly qualified recovery specialist has been established to aggressively recover the NPLs.

“As at end-June 2024, legal actions have been taken on all 43 NPLs.

Masidi said SDB’s new board has set a key performance indicator (KPI) of RM1 billion NPL recovery per year for the next three years and will exit Peninsular Malaysia by then.

He said the bank’s new board and management have been able to resolve the bulk of legacy government-linked company (GLC) loans, and with these repayments, SDB has been able to reduce its bond repayment obligations.

“In September 2023, the bank’s borrowings were RM5 billion. As at end-May 2024, the borrowings were reduced to RM3.9 billion,” he said.

Masidi said one of the bank’s highest-profile legacy GLC loans was with the huge RM1.4 billion loan with Sabah International Petroleum Sdn Bhd (SIP).

“SMJ Energy Bhd has acquired SIP and used the cheap sukuk fund to settle RM700 million in SIP debt to SDB, thus achieving interest savings of RM60 million for 2024 alone.

“At the same time, this debt payment allowed SDB to settle its bond repayment obligations without rolling over, resulting in RM35 million interest savings per year,” he said.

Masidi said a similar scheme was explored in 2019-2020, where Sabah Development Bhd, the holding company of both SDB and SIP at the time, approved a RM10 billion sukuk with the intention of using the sukuk proceeds to refinance SIP’s loans with SDB.

“However, this sukuk failed due to market concerns about the opaque governance for utilisation of proceeds and repayment of funds,” he added.

Masidi said SDB’s board and management are now firmly guided by a new mandate to pursue development projects that are economically and socially meaningful and environmentally responsible in Sabah.

“In the first five months of this year, SDB rejected RM1.5 billion loan applications which did not fall within this mandate or meet the bank’s new stringent credit test.

“The loans approved in the first six months of this year amounted to RM616 million, in the sectors of oil and gas (RM426.5 million), energy (RM96.3 million), construction (RM62 million) and infrastructure (RM32 million), 100 per cent in Sabah,” he added.

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