Don: Sarawak’s strategic investment in Affin Bank could be a ‘double win’

KUALA LUMPUR (July 21): The Sarawak government’s plan to increase its stake in Affin Bank Bhd to around 30 per cent from the current 4.8 per cent could be a ‘double win’, realising high or reasonable returns from its investment.

Reorienting the bank’s lending focus could also accelerate economic development, especially if the projects are bankable, Prof Dr Yeah Kim Leng, the deputy president of the Malaysian Economic Association, told Bernama.

“In addition to Sarawak’s large-scale financing needs to develop its oil and gas, hydropower and hydrogen, carbon capture, plantation, and energy-intensive industries, its small and medium enterprises also require access to finance,” he said.

Yeah said from an economic standpoint, the state’s strategic investment in Affin Bank might give the bank a regional advantage by accessing greater lending opportunities and expanding its financial services in line with Sarawak’s strong growth prospects.

However, politically connected lending could be problematic if governance is weak, though this risk has lessened significantly due to improved risk management in banks and a well-regulated banking sector, he added.

Currently, the Armed Forces Fund Board (LTAT) is Affin Bank’s biggest shareholder with a 28.88 per cent stake, followed by the Hong Kong-based Bank of East Asia Ltd, which holds 23.93 per cent.

It was reported that the Sarawak Government and the LTAT were expected to sign a sale and purchase (S&P) agreement to formalise the state’s plan to increase its stake in the lender.

However, the signing ceremony was postponed as Sarawak sought to “clarify some conditions” that Bank Negara Malaysia had attached to the deal.

Instead of the S&P agreement, both parties signed a memorandum of understanding on Friday (July 19) to explore strategic investments.

Sarawak Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg said the collaboration presents a unique opportunity for Sarawak to explore potential cooperation, particularly in six priority sectors, namely manufacturing, commercial agriculture, tourism, forestry, mining and services.

Meanwhile, Yeah said Sarawak’s decision to increase its stake in mid-sized Affin Bank is not expected to alter the banking sector landscape in Malaysia, given the presence of over twenty banks and banking groups in the country.

“However, it is expected to lead to a change in the bank’s strategic direction, specifically its likely strong focus on lending and financial development activities in Sarawak,” he said.

Affin Bank’s share price has surged dramatically in recent weeks amid mounting anticipation of an impending deal between Sarawak and the bank’s major shareholder.

It gained 20.2 per cent over the period to peak at RM2.98 on Tuesday before closing lower on Friday at RM2.80, giving the company a market value of RM7.13 billion.

Yeah said fluctuations in stock price ahead of the anticipated signing are typical market behaviour as investors speculate on the potential impact and implications of the Sarawak government’s increased stake in the bank. – Bernama