More On Maybank

Blogged on Friday night: Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!

Mentioned was the impairment losses issue.

On today's Edge. PAC report: BII buy may impair Maybank results by RM300m in FY09

• KUALA LUMPUR: Malayan Banking Bhd (Maybank) may make impairment losses of about RM300 million in Bank Internasional Indonesia (BII) for its financial year ending June 30, 2009 (FY09), a Bank Negara Malaysia (BNM) official told the Parliamentary Public Accounts Committee (PAC) last November.
  
  According to BNM assistant governor Nor Shamsiah Mohd Yunus who was called to appear before the committee chaired by Datuk Seri Azmi Khalid (Padang Besar-BN) then, Maybank’s impairment losses in BII could be in the region of RM300 million, based on Indonesia’s risk-free rates at that time.
  
  “The outlook is for Indonesia to reduce the interest rates further but based on our current assessment, the impairment could be in the region of RM300 million.
  
  “But if the interest rate were to come down further, that is likely to be the case based on what the (Indonesian) governor has said because of the impending slowdown, then we think that there may not even be any impairment when it comes to the June 30 account,” Nor Shamsiah told a panel of 11 PAC members.
  
  The published transcript of three panel hearings last November on Maybank’s takeover of BII was handed to Members of Parliament at the Dewan Rakyat last week.
  
  The hearings were held in the midst of the controversy surrounding Maybank’s purchase of BII due to the high cost.
  
  According to a copy of the transcript obtained by The Edge Financial Daily, Nor Shamsiah said Maybank would have to make an annual impairment assessment according to the accounting policy.
  
  “They (accountants) would look at the future cash flow and they will do a present value. So you look at the height of the crisis when we imposed the condition, the discount rate was very high and that is why your present value will be smaller and they could be very big impairment. That was why we imposed the condition,” she explained.
  
  Nor Shamsiah was referring to BNM telling Maybank to obtain a new agreement on a purchase price that would not result in it making substantial impairment under international reporting standards and impacting the fundamental soundness of Maybank. Maybank had since obtained a RM759 million discount from Temasek on the purchase price of BII.
  
  Nevertheless, she said with the discount and the decrease in Indonesia’s discount rate following the interest rate cut, the impairment that Maybank might need to book for the current financial year would be “something that the bank could absorb”.
  
  Commenting on Tony Pua’s (Petaling Jaya Utara-DAP) remark on the concept of a “high value in use” that resulted in a minimum impairment in BII, Nor Shamsiah said it was because BII was a long-term investment for Maybank and as such, it would look at its growth perpetuity in determining impairment losses. She added that it was a standard methodology used in industries.
  
  Meanwhile, the PAC report also revealed that BNM officials believed the Maybank president/chief executive officer transition plan was also a factor that might have adversely affected the deal.
  
  Nor Shamsiah said Maybank was caught off-guard by the sudden departure of its president and CEO Tan Sri Amirsham A Aziz who was appointed a senator and then made a minister in the Prime Minister’s Department.
  
  She said the plan was for the new CEO, Datuk Seri Abdul Wahid Omar, to assume his role on June 1 while Amirsham would stay on for one month to ensure a smooth transition.
  
  “Suddenly that plan could not be followed because the current CEO was appointed a senator. So that was something that was not foreseen by Maybank when it was managing this acquisition. So, looking back, one area that Maybank could have managed better was the transition,” said Nor Shamsiah.
  
  She explained that the management had given the mandate to the president to undertake the acquisition and when Amirsham was made senator half-way through the deal, the bank was caught unawares.
  
  “It did not have a contingency plan in place to deal with that immediately. Its contingency plan was to have the current and new president to overlap for one month. When you are caught with unanticipated development, the outcome is not as good as what you could have hoped for,” she said.
  
  The report also revealed that BNM was unaware that Maybank was the only bidder after HSBC Holdings plc and Bank of China Ltd withdrew their bids.