How did the Malaysian subsidiary of banking group Kuwait Finance House incur hefty non-performing loans over the last few years – and who was responsible?
Provisions for non-performing loans (according to The Edge, 21-27 May):
Financial year/Provisions made
2008 – RM165m
2009 – RM185m
2010 – RM191m
2011 – RM796m
Total provisions for non-performing financing in the last four years: RM1.3bn.
The sharp rise in provisions resulted in an after-tax loss of RM596m in 2011. (The bank, however, has returned to the black in the first quarter of 2012.)
RM2.25bn in new capital has been injected into the group since 2004.
According to its CEO Jamelah Jamaluddin, who took over in 2010, the bad loans are from financing of vessels, manufacturing, and some property. Basically, the “support services industry”.
The banking group has undergone two special audits in 2010 and 2011 and this led to additional provisions for the pre-2010 non-performing loans.
“We have made a report to the authorities and we are leaving it to them. We have escalated it to the authorities and are collaborating with them. The legal process is ongoing,” Jamelah told The Edge in an interview.
When The Edge noted that no one had been hauled to court since the investigations began, Jamelah responded, “That is not up to the bank. That is not our part. It is up to the authorities.”
It would be interesting to see who the borrowers actually are and whether anyone will actually be hauled to court. (After all, we hear all the time of people being taken to court for much smaller unpaid loans while shop-lifters have even been jailed for petty theft.)