KOTA KINABALU: The financial situation from Sabah Development Bank (SDB) will be turned around with the Gabungan Rakyat Sabah (GRS) government's strong support, said state Finance Minister Datuk Seri Masidi Manjun.
SDB is a wholly owned subsidiary of the Sabah State Government that acts as an active financial intermediary.
"When the new board was appointed in July 2023, the bank was in a dire financial position.
"The real numbers for non-performing loans (NPLs) were sky-high, funding was inadequate to meet maturing bond obligations, and recovery actions were passive and slow.
"The quality of existing loan assets is poor. Out of the RM6.6 billion loans portfolio as at end-May 2024, 75 per cent or RM5 billion are NPLs," he said during the state assembly sitting adding SDB had reporting profits of RM580 million for the past six years.
However, several measures have been taken to salvage the bank, such as adopting industry practices and Bank Negara guidelines, reclassifying loans into NPLs as they should be, taking legal action against all 43 NPL borrowers, and hiring a recovery specialist.
He added the new board has also targeted RM1 billion NPL recovery per year, for the next 3 years.
Masidi was answering Datuk Seri Mohd Shafie Apdal's (Senallang-Warisan) several questions related to the bank including total loans and the nature of business of those borrowers from Peninsular Malaysia.
He added the total amount of loans approved to companies in Peninsular Malaysia for the period from 2003 to 2018 was RM8 billion with 95 per cent in the property development sector in the Federal Territory of Kuala Lumpur, Selangor, and Johor.
In Sept 2023, the bank's borrowings were RM5 billion. As of the end of May 2024, the borrowings were reduced to RM3.9 billion.
One of the high-profile Government-linked company legacy loans is the huge Sabah International Petroleum Sdn Bhd (SIP) loan amounting RM700 million.
Masidi also said that in the first five months of this year, SDB had also rejected RM1.5 billion loan applications which did not meet state's requirement or stringent credit test.
As for the RM616 million in loans approved in the first six months of this year, these are distributed across the sectors of oil and gas (RM426.5m), energy (RM96.3m), construction (RM62m), and infrastructure (RM32m), with 100 per cent of the loans allocated to projects in Sabah.
Pictures courtesy of Japen Sabah