Genting HK: No material loss, only dented reputation

Tangible effects would still be manageable — though quite significant — while profit margin for the banks would definitely be impacted 


THE issue of unsecured loans to Genting Hong Kong Ltd (Genting HK) by local lenders may not pose any huge loss but local institutions’ — Khazanah Nasional Bhd, Permodalan Nasional Bhd (PNB) and Employees Provident Fund (EPF) — reputation as shareholders may take a hit. 

It was reported that Malayan Banking Bhd (Maybank), CIMB Bank Bhd and RHB Bank Bhd were among some of the key unsecured creditors of Genting HK, a major Asian corporate casualty of the Covid-19 pandemic. 

The report by Singapore’s Straits Times said that these three banks are among some of the chief unsecured creditors of Genting HK, with a combined exposure of US$600 million (RM2.5 billion). 

Economic analyst Assoc Prof Dr Baharom Abdul Hamid said tangible effects would still be manageable, though quite significant, but manageable, while profit margin for the banks would definitely be impacted, ultimately the return to the shareholders.

“The intangible effect is somehow more worrying. This would somehow trigger the notion that these banks (CIMB Bank, Maybank and RHB Bank) are ‘greenwashing’. While they are portraying being a responsible financial institution, being involved in both financing and investment in ‘value’, and ‘ethical’ business, it would now be questioned,” he told The Malaysian Reserve (TMR). 

“As for the shareholders themselves, the same question would be put forward. Khazanah, PNB and EPF has boldly announced its intentions of being involved in responsible investment, in fact, Sustainable and Responsible Investments. This would leave a dent in their image and reputation,” he explained. 

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture) recently clarified that banks could approve unsecured loans based on the bank’s willingness to take risks at the internal level, credit assessment that meets the criteria and approval based on the internal governance process. 

“Furthermore, in the case of Genting HK, a company involved in the tourism and leisure sector, the loan was approved before the pandemic hit. 

“When Covid-19 hit, many companies that depend on tourism were affected, and this is, of course, something that cannot be expected when the loan was approved,” he said. 

He said this, following queries by Port Dickson MP Datuk Seri Anwar Ibrahim on the issue of three local banks named as among the chief unsecured creditors of Genting HK, with a combined exposure of US$600 million. 

Tengku Zafrul also said local banks were not the only ones that had provided unsecured loans to Genting HK, but also banks from abroad. 

However, Putra Business School Assoc Prof Dr Ahmed Razman Abdul Latiff does not believe this issue will have a huge impact on these local investment institutions. 

“For example, EPF’s market value of its assets is more than RM1 trillion and dividends from these three banks form a very small percentage of its RM60 billion annual gross income. 

“Similarly, PNB has assets under its investment totalling more than RM322 billion and therefore will not be significantly affected by the Genting HK debacle,” he told TMR.