This article first appeared in The Edge Malaysia Weekly on November 30, 2020 - December 6, 2020

STEVE Chen, CEO of Al Rajhi Banking & Investment Corp (M) Bhd (Al Rajhi Malaysia), has left the Islamic banking group to pursue other interests, even as the bank looks to fill empty board seats, sources say.

“We would like to inform you that our CEO … has decided to pursue other interests outside of Al Rajhi Malaysia with the completion of his employment contract and his last physical working day is Nov 16, 2020,” the bank said in an internal memo seen by The Edge.

The memo, issued by the bank on Nov 16, went on to thank Chen for his contributions and wished him and his family well. It said that until a new CEO is found, chief operating officer Zarir Mohd Rawi would be the acting CEO to oversee the day-to-day management of the bank.

According to sources, Chen — who took the bank’s helm in late March 2016 — decided to leave ahead of the official end of his contract in March next year. Chen, when contacted, confirms the contents of the memo.

“It was a mutual decision,” he tells The Edge when asked why his contract was not extended. “I think it’s a good time for me to move on. I’ve had a good five-year run and we’ve accomplished quite a bit in that period.

“The bank today is very different from when I started. For example, in terms of profitability, we have probably made more money in the last four years than we did in the previous 10 years. But what it needs now is more resources [from the shareholder] to grow the business.”

Meanwhile, the bank is understood to be in dire need of several board appointments, some of which are expected to be made soon. Its website lists just two directors currently, namely Steve Paolo Bertamini (a non-independent, non-executive director) and Ow Chee Hong (independent non-executive director).

The bank’s chairman position has also yet to be filled after Muhammad Afaq Khan resigned in late February. Johari Muid, an independent non-executive director, recently left and joined Bank Muamalat Malaysia Bhd on Nov 10 in a similar role.

Al Rajhi Malaysia — a wholly-owned subsidiary of Saudi Arabia-based Al Rajhi Bank, the world’s largest Islamic lender by assets — is one of two standalone foreign Islamic banks in the country, the other being Kuwait Finance House (M) Bhd.

Islamic finance industry observers say the bank’s efforts to grow its business on a bigger scale amid the highly competitive industry are limited by its relatively small capital base. Its total Tier-1 capital has remained pretty constant over the years at just over RM700 million. It stood at RM705.4 million as at end-June. Its asset size, at RM6.83 billion, is small when compared with the largest standalone, Bank Islam Malaysia Bhd (RM64 billion).

To Chen’s credit, he has managed to grow the bank quite well despite the capital limitations. Al Rajhi Malaysia, which was set up in October 2006, made losses in its first two financial years before turning profitable in 2009. Under Chen, who placed a stronger focus on the corporate banking segment, its net profit grew from RM6.75 million in FY2016 to a record-high of RM29.85 million in FY2019.

Net profit in 1HFY2020 fell 56.9% year on year to RM3.08 million, reflecting the impact of the Covid-19 pandemic. It is understood that the results do not yet include a modification loss from the six-month blanket loan repayment moratorium that kicked off in April.

Asked about his next move, Chen says he is looking at a few options. “I’ve done banking for a long time, so at this stage in my career, it may be time to look at something else. But at the moment, I just want to take a short break.”

Prior to joining Al Rajhi Malaysia, he held senior positions at Hong Leong Bank Bhd, JPMorgan, The Royal Bank of Scotland and Standard Chartered Bank.

Sources say Al Rajhi Malaysia’s search for a new CEO is ongoing, and will include external candidates.

Earlier this month, the bank called off a planned merger with Malaysian Industrial Development Finance Bhd (MIDF). Its parent company said, given that no agreement had been reached, it decided to end the negotiations with MIDF. The two parties had been negotiating a merger since January 2019.

Industry observers say it is unlikely that the bank will look for another merger so soon, if at all, given the complications brought about by the Covid-19 pandemic.

“I think any bank would want to see the dust settle after the loan repayment moratorium, for instance, and see how the numbers pan out before taking any decision to consider a merger seriously,” one remarks.

There are currently 16 Islamic banks in Malaysia, of which five are foreign.

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