This article first appeared in The Edge Financial Daily on January 4, 2019

KUALA LUMPUR: AMMB Holdings Bhd is cleaning up the loan books in AmBank (M) Bhd and AmBank Islamic Bhd by selling off RM553.91 million of non-performing loans (NPLs) to Aiqon Capital Group Sdn Bhd.

AMMB Holdings announced yesterday that Bank Negara Malaysia has given its green light for the proposal, which is part of the debt recovery strategy to strengthen both AmBank’s and AmBank Islamic’s financing management and to monetise the portfolio.

Proceeds from the proposed disposal will be utilised for working capital within one year of completion. The sale of NPLs came after the proposed merger between AMMB Holdings and RHB Bank Bhd was aborted in August 2017.

The proposal is a related-party transaction, said AMMB Holdings in the filing with Bursa Malaysia.

Ibrahim Hussain, the controlling shareholder of Aiqon Capital, is the son-in-law of AMMB Holdings’ substantial shareholder Tan Sri Azman Hashim, according to the banking group’s announcement dated July 2016. Azman holds 12.97% stake in the banking group through Clear Goal Sdn Bhd.

Aiqon Capital’s shareholders are Orisure Sdn Bhd, which is the largest shareholder holding 50.2% stake, Zetovest Sdn Bhd (48.03%) and two minority shareholders Kurnia Quantum Sdn Bhd (1.32%) and Mezzanine Capital (M) Sdn Bhd (0.34%), filings with Companies Commission of Malaysia show.

Ibrahim is the majority shareholder of Orisure and Zetovest. Amcorp Group Bhd is the sole owner of Mezzanine.

AmBank has signed an agreement with Aiqon Amanah Sdn Bhd to sell RM428.11 million worth of NPLs to the latter, while AmBank Islamic has signed an agreement with Aiqon Islamic Sdn Bhd to dispose of RM125.8 million worth of NPL, said the filing to the stock exchange yesterday.

Aiqon Amanah and Aiqon Islamic are the two special purpose vehicles (SPVs) set up by Aiqon Capital to purchase and manage the portfolios of AmBank and AmBank Islamic.

The portfolios comprise 537,068 accounts. The borrowers include individuals and corporations who had undertaken industrial hire purchase, small-and medium-industry loans; auto financing; mortgage; personal loan or financing under cooperative; and credit cards.

Aiqon Capital specialises in acquisition and management of non-performing loan assets from banks and financial institutions, said the announcement. To date, Aiqon Capital has acquired in excess of RM43 billion, in face value, of NPL assets, said the filing.

“The proposed disposal is expected to have a positive impact on the financial results of AmBank Group,” said AMMB Holdings. Barring any unforeseen circumstances, the proposed disposal is expected to be completed by March 31.

AMMB Holdings’s share price has been on a bumpy upward trend since May last year. It rebounded from the low of RM3.326 to a high of RM4.43 last month. It closed at RM4.33, which is at price to book value of 0.79 times.