CIMB transfers NPLs to subsidiary

CIMB Group received approval from the Minister of Finance for the proposed disposal of part of its non-performing loans to a special purpose company.

Southeast Asia Special Asset Management Berhad or SEASAM will receive a portfolio of mostly legacy NPLs comprising approximately 45,000 accounts. It has a gross loan amount of US$2.49 billion and net book value of US$275.9 million. SEASAM will be wholly-owned by CIMB Group and will become a dedicated entity with a clear focus and emphasis on NPL management and the corresponding resolution processes.

"SEASAM lays the foundation for the creation of a regional entity within CIMB Group that will operate, manage and extract value from CIMB Group's NPLs in Malaysia and across the region," said Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group. "The creation of a separate identifiable entity for NPLs would further reflect a clean break from the past and allow stakeholders to easily differentiate between the results of CIMB Group's business transformation and its legacy NPL recovery efforts," he added.

CIMB Group has also confirmed that Dato’ Zainal Abidin Putih will be Chairman of the Board, while Ahmad Shazli Kamarulzaman has been identified as a candidate for the CEO position. Both parties bring with them vast experience in management of NPLs and distressed assets gained from Pengurusan Danaharta Nasional Berhad, the national asset management company set up by the Ministry of Finance in the wake of the 1997 Asian financial crisis.

The disposal is not expected to have any material effect to CIMB Group's earnings; but will see CIMB Bank's gross NPL ratio drop to 2.8 percent and its net NPL to 1.3 percent. Loan loss coverage will improve from 91.8 percent as at 30 September 2009 to 116.1 percent. There will be no change to CIMB Group's consolidated ratios.

CIMB Bank and SEASAM will now sign a sale and purchase agreement and proceed with the asset vesting process. CIMB Bank is expected to deconsolidate these assets in its financial year ending 31 December 2009.