This article first appeared in The Edge Financial Daily, on May 9, 2016.

KUALA LUMPUR: The news that AMMB Holdings Bhd’s largest shareholder — Australia and New Zealand Banking Group Ltd (ANZ) — provided A$260 million (RM766 million) impairment loss on the Malaysian banking group in its first-half financial results has sparked speculation that the sum charged is paving way for the Aussie shareholder to exit.

Besides the fact that it is the direction ANZ’s new chief executive officer (CEO) Shayne Elliott is taking to divest some of its minority stakes in Asian banks, many have said that governance issues at AMMB added to the pressure to divest the 23.78% stake that it bought in almost 10 years back.

Many concur that ANZ’s entry as the single largest shareholder has brought about good changes to the local bank.

“A lot has improved over the last 10 years. AMMB many years ago was not the AMMB now. One thing that is apparent is that its asset quality has improved significantly. The number of auto loans in the group’s portfolio has also reduced dramatically and they have been securing less risky clients,” said an analyst.

AMMB’s gross impaired loans stood at 10.9% in financial year 2007 ended March 31. Fast forward nine years later, its gross impaired loan ratio for the third financial quarter ended Dec 31, 2015 stood at barely 1.8%.

Another analyst added that the mergers and acquisitions over the last 10 years, like MBF cards and Kurnia Insurance, showed that ANZ has played an active role in growing the banking group.

ANZ representatives have been elected as group managing director and deputy group managing director, among other positions on the board, since the Melbourne-based banking group came into the picture.

However, ironically, Elliott was seen trying to downplay the Melbourne-based banking group’s involvement in AMMB when he was recently quoted by Australian press as saying that ANZ “doesn’t run that bank”.

AMMB has been on the watch following news reports that US$1 billion (RM4 billion) donation fund had been transferred into Prime Minister Datuk Seri Najib Razak’s personal accounts in AmBank — wholly owned by AMMB.

Unsurprisingly, AMMB’s share price shaved off 25.4% of its value in the last year, falling from RM6.06 to RM4.52 last Friday.

ANZ’s notes accompanying its latest financial statements state that the assessment of AMMB had indicators of impairment, specifically its market value based on share price being below its carrying value. ANZ’s value in use calculations showed that the carrying value in AMMB was impaired, which resulted in the A$260 million impairment on the Malaysian banking group.

“The value in use calculation is sensitive to a number of key assumptions, including discount rate, long-term growth rates, future profitability and capital levels,” added ANZ.

It remains to be seen how AMMB would fare should ANZ exit the local banking group as a shareholder. Some parties opine that operations will remain the status quo even if ANZ is no longer a shareholder.

“The building blocks have been set. I don’t think the general direction of the bank will change if ANZ exits as a shareholder,” says one analyst.

Another analyst added that it might be better for AMMB if ANZ exits, as it would enable the bank to take full control of its operations.

“A 24% stake with board representation would mean that the major shareholder would be able to exert some control over AMMB and in the way in which things are run,” said the analyst.

All said, some quarters noted one thing that remains unchanged in AMMB is that its founder Tan Sri Azman Hashim is still a substantial shareholder of the banking group. He is the third-largest shareholder, holding a 12.97% stake, after the Employees Provident Fund with a 15.01% stake.

Many are waiting to see the three-year strategic plan of AMMB, which will be unveiled this month by its new group CEO Datuk Sulaiman Mohd Tahir. Sulaiman succeeded former group managing director Ashok Ramamurthy, an Australian national, who resigned from the post in January last year and rejoined ANZ in Melbourne. He left ANZ in March this year.

Some quarters take the view that AMMB’s future direction may also depend on the new shareholder or shareholders, should ANZ sell down its stake. Recently, The Edge weekly reported that three foreign private equity firms are eyeing ANZ’s stake, being TPG Capital, KKR and CVC Capital Partners. Among the three, TPG seems to have the most investment in financial services companies in the region, ranging from Indonesia to India.

Interestingly, Elliott disclosed that the Aussie bank has yet to receive any formal proposal to acquire its stake in AMMB.

Nonetheless, any interested party will first have to get the nod of approval from Bank Negara Malaysia before a potential acquisition can happen.