Bank Pembangunan-Danajamin merged entity to be operational in 4Q

Both are reviewing strategies to expand their scope of business in providing a wider range of products and services

by ALIFAH ZAINUDDIN / pic credit: BPMB LinkedIn

BANK Pembangunan Malaysia Bhd’s (BPMB) merger with Danajamin Nasional Bhd is expected to remain on track despite the recent change in government, with the new entity expected to commence operations in the fourth quarter of this year (4Q20).

BPMB, in its response to a query by The Malaysian Reserve on the merger, said it is currently conducting the necessary due diligence process, while the targeted operational effective date for Phase 1 would be completed by 4Q20, subject to shareholder and regulatory approvals.

“The steering committee chaired by the Ministry of Finance has endorsed the institutional structure for Phase 1 of the development financial institutions’ (DFIs) merger. Under the proposed structure, Danajamin will become a wholly owned subsidiary of BPMB,” it said in a statement.

Currently, both BPMB and Danajamin are reviewing their business strategies to expand their scope of business in providing a wider range of products and services, as well as a greater value proposition to customers.

The former Pakatan Harapan government had earlier proposed in Budget 2020 for the merger and restructuring of BPMB, Danajamin, Export-Import Bank of Malaysia Bhd (Exim Bank) and Small

Medium Enterprise Development Bank Malaysia Bhd (SME Bank) to reinforce the DFI ecosystem.

The two-phase restructuring plan would be implemented through the merger of BPMB with Danajamin in Phase 1, and subsequently, the union of Exim Bank and SME Bank into the earlier merged entity.

While the reasons for the merger remain unclear, it was implied that a single unified DFI would improve operations and resolve backlog issues on non-performing loans and corporate governance.

BPMB’s mandate is to provide funding to strategic sectors such as maritime, public transport and tourism. Danajamin, on the other hand, provides financing for selected infrastructure projects.

SME Bank focuses on small and medium businesses, while Exim Bank centres on the export and import of goods.

The merger of the four DFIs is expected to create an asset base worth nearly RM50 billion.

As of end-2018, BPMB had total assets of RM24.73 billion, while Danajamin had assets amounting to RM2.75 billion. Exim Bank had total assets of RM11.99 billion and SME Bank, RM9.72 billion.

Bank Negara Malaysia (BNM) in December last year gave its approval to BPMB and Danajamin to begin negotiation on the first part of the proposed plan. Talks between BPMB and Danajamin were expected to be completed within six months from the central bank’s approval.

The steering committee — which comprises representatives from the Ministry of Economic Affairs, Ministry of Entrepreneur Development and Cooperatives, Ministry of International Trade and Industry, Credit Guarantee Corp Malaysia Bhd, BNM and the four DFIs — will oversee the implementation of the restructuring plan.

With a combined asset value of RM24.7 billion as at Dec 31, 2018, BPMB said it is well-positioned to meet the financing and business development needs of Malaysian businesses in the priority sectors.