SDB announces nearly RM1bil in losses, projects three-year turnaround

KOTA KINABALU: State-owned Sabah Development Bank Berhad (SDB) is projecting a three-year turnaround as it announced a combined loss of nearly RM1bil for the financial years 2023 and 2024.

The company announced a pre-tax loss of RM878mil (net loss RM684mil) for 2023 based on its audited results and projected a pre-tax loss of approximately RM100mil for 2024.

In a statement on Thursday (Aug 22), SDB said that the losses were mainly due to non-performing loans (NPL) and reduced asset values.

Sabah Finance Minister Datuk Seri Masidi Manjun revealed at the Sabah Assembly recently that mismanagement and "creative accounting" had made it appear that the bank was making profits.

Masidi had said that the bank chalked up RM5bil in NPLs and the former bank management allegedly covered it up by issuing new loans to reflect a profit for five continuous years until 2022.

The SDB statement did not directly refer to Masidi's disclosure but said that if proper accounting principles were followed, losses would have been recorded in those years instead of profits.

According to SDB, an earlier estimation suggested a pre-tax loss of RM500mil for both 2023 and 2024.

However, during the finalisation of the audited accounts, adjustments were made which reallocated some expected credit losses from 2024 to the previous financial year.

"These adjustments contributed to the very much higher reported loss for 2023 and a corresponding reduction for 2024," read the statement.

SDB said the Sabah government remains firmly committed to meeting all bond repayment obligations, ensuring the bank's financial stability.

It added that SDB appointed a new board of directors and management team in the second half of 2023 and was backed by the Sabah Finance Ministry.

The Sabah government appointed veteran oil and gas senior manager Datuk Seri Lim Haw Kuang as SDB executive chairman and senior banker Patricia Ubing as its chief executive officer in the revamp.

SDB also said it had received RM1.9bil in legacy loan repayments from government-linked companies (GLC) and reduced its bond repayment obligations from RM5bil in July 2023 to RM3.3bil in July 2024.

It also noted that significant progress was made to reduce NPLs to RM5bil, were secured against land and commercial assets.

SDB is on track to achieve its recovery target of RM1bil this year, with similar targets set for the next two years.

To further strengthen SDB's capital base and meet Bank Negara's capital adequacy ratio guidelines, the Sabah Finance Ministry converted RM660mil of its fixed deposits with SDB into redeemable preference shares.

"SDB is committed to its new mandate of focusing on development projects in Sabah's critical sectors, including water, power, and infrastructure, under stringent credit and risk management guidelines," the bank said.

The state government has also designated SDB as the lead lender for local content financing for major investments across Sabah, collaborating with reputable commercial banks and development financial institutions.

Given the state government's strong support, auditors confirmed SDB as a going concern. RAM rating services had also reaffirmed SDB's debt instruments rating at AA1.

"This reflects the bank's strong capability to meet its financial obligations and resilience against adverse changes," the statement said.

With the solid support of the state government, SDB said it would be able to turn around its financial position within three years.