This article first appeared in The Edge Malaysia Weekly on January 10, 2022 - January 16, 2022

MARKET talk has it that Bank Pembangunan Malaysia Bhd (BPMB) could have a new CEO within the next few months as the incumbent Arshad Mohamed Ismail is looking to leave.

The speculation that is making the rounds is that Arshad, who was appointed to helm BPMB in April 2019, could be coming to the end of a three-year term and may be looking to leave the Minister of Finance Inc-owned development financial institution (DFI).

When asked about this, BPMB says, “As a regulated entity, Bank Pembangunan does not comment on matters of a speculative nature.”

Nevertheless, three separate sources have heard about BPMB scouting for a new CEO.

One source, who spoke to The Edge on condition of anonymity, says, “From what I hear, BPMB will need a CEO soon — Arshad is leaving — and there is already an active search going on.” Another source echoed the same view but adds that chairman Tan Sri Nazir Razak, who was appointed in April last year, is also involved in the selection of a new CEO.

However, Nazir could not be contacted at press time to confirm the rumours.

Nazir is an old hand in the banking industry. He is the founding partner and chairman of Ikhlas Capital, an Asean private equity firm, and had a stint as CIMB Group Holdings Bhd’s chairman for four years and CEO for 15 years prior to that. He was also a non-executive director of Khazanah Nasional Bhd for four years and a member of the Employees Provident Fund’s investment panel for 15 years. Hence, Nazir being involved in the selection of a new CEO for BPMB is not surprising.

Nevertheless, a new appointment to helm BPMB is likely to generate considerable interest as it is slated to play a key role in the plans to merge the local DFIs, namely Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank) and Export-Import Bank of Malaysia Bhd (Exim Bank), under its belt, as stated in Budget 2020.

In November last year, BPMB completed the purchase of Danajamin Nasional Bhd, making it a wholly-owned subsidiary and, more importantly, started the consolidation ball rolling.

A third source explains that BPMB has been looking for a new CEO to synchronise and orchestrate the enlarged entity — BPMB and Danajamin.

While BPMB has been performing well financially, its gross impaired loans, financing and advances ratio at 11.29% is considered high, but it is still down from 12.15% a year ago. In 2016, the ratio was in excess of 15%.

For its financial year ended December 2020, BPMB chalked up a net profit of RM107.08 million, down from RM251.59 million a year earlier. As at end-2020, the DFI had total assets of RM23.48 billion while its total liabilities stood at RM15.51 billion.

The current situation at BPMB is much better than about four years ago, when the DFI was in the spotlight due to loans of more than RM200 million to Tan Sri K K Eswaran’s Asian Broadcasting Network Sdn Bhd, which had to auction off its assets to pay off creditors.

BPMB had also extended more than RM300 million to two companies linked to Indonesian businessman Tan Sri Peter Sondakh — Integrated Nautical Resort Sdn Bhd and Garuda Suci Sdn Bhd — which built and operated the St Regis Langkawi and Langkawi International Convention Centre. The convention centre had been suffering losses since 2013.

Both Eswaran and Peter Sondakh were known associates of former premier Datuk Seri Najib Razak, the brother of chairman Nazir.

Other than the above, BPMB’s 90%-owned unit Global Maritime Ventures Bhd, which managed a shipping finance fund, also came under fire after it ended up wholly owning Syarikat Borcos Shipping Sdn Bhd, which had a RM62.7 million facility with BPMB and to which KPMG was appointed a liquidator at end-December 2016.

BPMB also had a RM400 million exposure to Aries Telecoms, and news reports had it that the DFI sought legal recourse against the latter for RM451.27 million, but it is unclear how things have panned out.

In April 2021, the Malaysian Anti-Corruption Commission (MACC) detained four individuals linked to questionable loans dished out by BPMB, but what transpired is not known.

The DFI also came under the spotlight as its board and other committees had met more than 120 times a year, resulting in hefty payouts to directors who were compensated for the meetings they attended.

However, to put things in perspective, the many issues at BPMB were prior to Arshad joining the DFI, and things seem to be more structured now.

With BPMB likely to play a lead role in the merger of various DFIs in the country, finding the right CEO for the job is imperative.

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