Spotlight on CIMB
What’s next for the banking group with Nazir’s impending departure?
CIMB GROUP Holdings Bhd chairman Datuk Seri Nazir Razak finally squelched all speculation this week when he announced that he will be leaving the lender by the end of the year, well ahead of the expiry of his chairmanship next August.
While some say that Nazir has been planning to exit the group for some time already, wanting to do other things, the timing of his announcement is questionable given that his brother, ex-premier Datuk Seri Najib Tun Razak was hit with 25 charges of graft and money laundering only last week.
We will never really know if Nazir – who calls himself 52 years “young” in his farewell message posted on Instagram – wanted his career at CIMB to come to an end at this point in time but the real question now is where will CIMB stand, post-Nazir?
Theoretically, a company chairman is not supposed to be hands-on when it comes to operations.
But in Nazir’s case, like it or not, he has been the face of the country’s second-largest lender having spent 29 years at the bank rising from the ranks.
And the market equates CIMB with him. “Let’s just say he has an overarching presence,” quips a banker.
Helped by his stewardship, CIMB has managed to grow from a small corporate finance firm in the late 1990s to the country’s now second-largest banking group by asset size after Malayan Banking Bhd (Maybank).
On the whole, market observers say post-Nazir, CIMB’s operations should not suffer because a capable leadership team and a solid business plan have already been in place for some time.
In fact, following Nazir’s announcement to quit, the CIMB stock did not fall much, suggesting that the market has accepted the decision and is not overly anxious.
One senior banker also points out that CIMB, which is 27.3% controlled by Khazanah Nasional Bhd, is institutionalised, therefore theoretically, it should not be susceptible to any one single individual influence.
On a more personal level, this same banker who has worked closely with Nazir, insists that he (Nazir) was indeed “collateral damage” in all of this and hopes that the market does not “dilute his contributions” to the lender.
“When I was working with him, he had never once asked me to do anything which was unethical and not proper.
“He always did have CIMB’s best interest in mind,” he says.
He believes that Nazir’s subject matter expertise is what tends to separate him from most regular banking heads.
“Don’t discount the fact that Nazir may make a comeback in the future, based on this fact alone,” the banker adds.
In April 2016, after a seemingly impeccable banking career dotted with achievements and recognitions, Nazir was dragged into a scandal about political funding and alleged misuse of money after it was revealed that his brother Najib had transferred a sum of about RM28mil (equivalent to US$7mil) into his account in the run-up to the 2013 general election (GE13).
The money, which was said to be from debt-laden state fund 1MDB, was disbursed to several people on behalf of Najib.
Nazir was, however, later cleared by current Attorney-General (AG) Tommy Thomas and the now Bank Negara governor Datuk Nor Shamsiah Mohd Yunus.
However, that incident also revealed that CIMB had fallen short in its compliance of some processes.
It also did seem to leave a mark on Nazir’s otherwise respected name.
“He is a big name but again, having been tainted by 1MDB, the issue of misgovernance will always haunt him.
“Anyway, what is more important now is how group CEO Tengku Datuk Seri Zafrul Aziz will steer the bank to the next level under the new government that promises more transparency,” says one investment banker.
Being fairly outspoken and constantly under the spotlight due largely to his family background, Nazir, the youngest son of Malaysia’s second Prime Minister Tun Abdul Razak Hussein, has his fair share of fans and detractors.
Another senior banker who has had many dealings with Nazir over the years brings in the example of Tan Sri Abdul Rashid Hussain, the founder of RHB Group, when commenting on Nazir.
“The difference between Nazir and Rashid is that RHB was privately owned and driven by Rashid, an entrepreneur, while Nazir has always been seen more as a professional manager-banker.
“Also, Nazir came into the driver’s seat of CIMB after the Asian Financial Crisis when the financial system in Asia was steadier and had expanded.
“In that sense, he escaped the major crisis that saw Rashid having to sell out from RHB.
“And now, whether coincidental or incidental, Nazir seems to be leaving the banking industry at a time when some are expecting another major financial crisis.”
Deals
Over the course of his 29-year career with CIMB, Nazir was at the centre of many corporate deals.
In the late 1990s, CIMB was a relatively small player in the investment banking (IB) scene.
At that time, RHB was the leader, bagging most of the big deals in town.
When Rashid exited the business after the disposal of his shares, RHB’s competitors like AmBank thought they could snag the deals that would otherwise be dominated by RHB.
“When Rashid left, from an IB point of view, AmBank which was tracking RHB closely thought it was its chance to take a piece of the market, but CIMB, which was up-and-coming at that point, cut into the race and won the deals,” recounts a banker who has been in IB for decades.
“It went to show that in this game, it is a question of whether you can deliver. It’s not really about you standing a chance when others fall behind.”
Maybank during that period was not really in the IB game, as it was mostly seen as a debt house.
It only came on to the scene after 2008. Despite having built his name in deal-making, some of Nazir’s past deals have come under criticism.
Among these is the merger of three companies that resulted in the enlarged Sime Darby Bhd back in 2006/2007.
The deal was proposed by CIMB Investment Bank and was largely seen as a landmark deal for Nazir, who was then CEO of CIMB Group.
The three companies were brought together under a special-purpose vehicle called Synergy Drive Sdn Bhd, making it the biggest merger deal in South-East Asia during that time.
The enlarged entity was meant to create value from the generation of scale and synergies, but ten years on, the goal seemed to have been unrealised.
Last year, the conglomerate was broken up with spin-offs of its plantation and property arms.
Diminishing Razak presence
Apart from Nazir, there are three other Razak brothers who are also in the corporate sector, but comparatively, they are lesser known than the banker.
Coincidentally, on the same day Nazir announced his impending departure from CIMB, middle brother Datuk Mohamed Nizam Razak resigned as board member of Petra Energy Bhd.
The 59-year-old, who was a stockbroker and the CEO of PB Securities Sdn Bhd in the 1990s, had held the post for only seven months, owning a 9.11% stake in the engineering services company.
He is also a director of Yeo Hiap Seng Ltd (Singapore) and Mamee-Double Decker (M) Sdn Bhd.
Datuk Ahmad Johari Abdul Razak, the second eldest after Najib – the only politician in the family - also sits on the board of several public-listed companies.
Among others, he is director at Ancom Bhd, Southern Steel Bhd and Daiman Development Bhd.
As for fourth brother Datuk Mohamed Nazim Razak, he retired as director of Hong Leong Capital after not seeking re-election to the board of the financial services company last October.
During this period, the 1MDB saga was at its height, with revelations about misappropriation of funds gathering steam.
All eyes on Tengku Zafrul
Back to CIMB, with Nazir’s impending exit and notwithstanding a new chairman, the focus has now turned to group CEO Tengku Zafrul.
In the first half to end-June, the lender’s net profit jumped 43.9% to a record RM 3.29bil from RM 2.28bil earlier, boosted by a gain from the sale of 20% of CIMB-Principal Asset Management and 10% of CIMB-Principal Islamic Asset Management amounting to RM 928mil.
Stripping out this gain, CIMB’s net profit actually fell by 4.5%.
To be sure, CIMB has evolved in recent years, with consumer banking being its biggest earnings contributor now. In the earlier years, IB was largely its DNA.
“It is now Tengku Zafrul’s turn to shine. So far, he seems to have been riding on the coat tails of his bigger boss,” says one banker, close to both Nazir and Tengku Zafrul.
What this basically means is that the way in which the 45-year-old will steer the ship from here will be closely watched.
“I would think he would perform ... he has to up the game or the bank will lose traction.”