KOTA KINABALU: The state government is fully behind Sabah Development Bank’s (SDBank) bid to recover its RM5bil in non-performing loans (NPL), says state Finance Minister Datuk Seri Masidi Manjun.

He said the NPLs were “secured and recoverable” after the new management took over the state-owned bank, where the previous management had been accused of covering up the NPLs.

Masidi also noted that the RM5bil worth of NPLs were not to be considered “losses” because the loans that were mainly secured against land-based assets were now under active recovery action.

“Achievements have been recorded since the new board and management came on board in the second half of 2023.

“GLC (government-linked company) loan exposure was reduced from RM2.2bil in July 2023 to RM700mil currently, and bond obligations from RM5bil to RM3.9bil,” he said yesterday.

At the just concluded Sabah assembly meeting, Masidi said there was a total “management meltdown” at the bank that led to RM5bil in NPLs chalked up from 2013 to 2018, with SDBank poised to post unprecedented losses for 2023 and 2024.

“I wish to reaffirm the state’s support of SDBank in times of need, particularly on our commitment to ensuring that the bond obligations and repayments are kept whole.

“The bank reflects the state’s financial standing and has an important role in the development of the state,” Masidi said, adding that the bank has put in place best practices and accounting standards since the new management took over.

He added that SDBank had always fulfilled its bond repayment obligations in the past and has sufficient capital to honour its coming bond repayment obligations.

“I was made to understand that the bank has, after the announcement (revelation in the state assembly), proactively engaged with key investors, depositors and other stakeholders.

“The general response is that there is full understanding and support for the bank to undertake this house cleaning, and they are reassured by the state’s strong support for the bank’s transformation plan.

“The state’s strong support is not just in GLC loan repayment exercises, but Sabah’s Finance Ministry has also issued letters to other GLCs to place excess cash as fixed deposits with SDBank,” he said.

Masidi added that another form of important financial support is the conversion of the state’s deposits of RM660mil to redeemable preference shares over the next few years to strengthen the bank’s capitalisation.

He also said the new management team has implemented strict governance and reported alleged wrongdoing to the Malaysian Anti-Corruption Commission (MACC) with the aim of recovering NPLs, with an aggressive target of RM1bil per year over the next three years.

Masidi said the bank expects to exit the Peninsular Malaysia market, where 75% of the loans granted by the bank to companies turned into NPLs.

“The bank is now firmly guided by the mandate from the state to pursue economically and socially meaningful and environmentally responsible projects in Sabah only,” he added.

https://www.thestar.com.my/news/nation/2024/07/13/sdbank-now-back-on-track