KUALA LUMPUR — Aug. 30, 2019: The worst is over for Lembaga Tabung Haji as the turnaround plan to stabilise the fund has started to show results.
In this regard, the new management has been able to reduce the risk of a run on the fund and to restore its balance sheet.
Outgoing managing director and CEO) Datuk Seri Zukri Samat noted that a systemic risk would have happened if the turnaround had not taken place.
“The worst is over. Tabung Haji is now moving forward. We have subtracted the bad assets and so on. I told the Prime Minister’s Office it is time for me to go. TH’s excess over liability stands at more than RM1 billion.
“I have created a reserve account. During good days, you do not distribute all your profits. You keep some in the reserve. TH had no reserve before but now it has about RM400 million,” Zukri told Bernama in an interview.
Zukri, who was appointed to steer the fund’s turnaround in July last year, will make an early exit from TH due to health reasons. He will be succeeded by Nik Mohd. Hasyudeen Yusoff effective September 1.
TH recorded a stronger financial performance in the first half of 2019, underpinned by a sustainable investment strategy and prudent cost management measures.
The fund recorded RM1.3 billion in revenue due to its sustainable investment strategy and prudent cost management measures.
“I did not expect the situation was that bad. When I moved in, we looked at the issues and the whole situation was much worse than we thought. People talked about bad investments in TH Engineering and such.
“In reality there was much more to that. What is more shocking is basically the revelation by the PwC report when the new leadership came on board,” he said.
Zukri was referring to a PricewaterhouseCoopers’ report which revealed that TH had failed to recognise RM549 million in impairment losses on investments in several associate companies and subsidiaries.
The report came after the 2017 Auditor-General’s Report disclosed that the fund’s board had failed to report an asset impairment totalling RM227.81 million from its investment in three subsidiaries and three associates, including a RM164.58 million investment in TH Heavy Engineering.
“When we saw all the reports coming from PwC, the board felt that we got to check on this. When we came in, even though the accounts for 2017 had been done, it had yet to be signed off.,” said Zukir.
PwC was appointed to relook at the whole thing.
The financial distress of TH was further aggravated by the weakening of the stock market in 2018, leading to a bigger deficit of RM10 billion as at last December 31 from RM4.1 billion a year earlier, as well as the adoption of a new accounting policy in the same year.
“Based on that accounting policy, certain provisions had to be made in some of the investments. Because of that we were short by RM10 billion,” said Zukri.
Under Zukri’s leadership, TH managed to clean up its balance sheet following years of accumulated deficits which led to illegal dividend payments to depositors since 2014.
“Our biggest task at the moment is how do we to make sure that we restore the balance sheet so that we are in the position to pay, not only for 2018 but also in the future,” he said.
TH announced a hibah of 1.25 per cent to its depositors for the 2018 financial year amounting to a total payout of RM913mil for 9.3 million depositors.
Zukri also rubbished the perceptions that he was pressured to step down.
“There are a lot of perceptions in the market, which we can’t stop. Some say that I am a non-performer — that is why the government possibly takes me out and also there are perceptions that Tun Daim (Tun Daim Zainuddin, ex-chairman of the Council of Elders) is impatient towards what happened in Tabung Haji.
“I am not trying to be sour grapes but even my achievements in Bank Islam were also being questioned. But you see the bank is going from strength to strength,” he pointed out.
Prior to his appointment at TH, Zukri was CEO of BIMB Holdings and MD of Bank Islam for over a decade.