PETALING JAYA: The passing of a banking doyen has raised questions over the shareholding of one of Malaysia’s largest banks.
With no individual allowed to hold more than 10% equity interest in a bank post-June 2013, there are many unanswered questions on how Tan Sri Teh Hong Piow’s 23.4% stake in Public Bank Bhd
will be managed.
The 92-year-old Teh, who passed away on Dec 12, left behind one son and three daughters. It is unknown whether the stake will be divided equally to each of them or whether the stake would be put under a trust.
In the event the equity interest is divided among the children, this could pave the way for the entry of a new major shareholder into Public Bank, if any of the children decides to cash out.
It is noteworthy that none of Teh’s children are involved in the top management of Public Bank.
Another possibility is that one of the existing institutional investors in Public Bank could partially acquire Teh’s stake in Public Bank in order to have a stronger control.
Currently, the second and third-largest shareholders of Public Bank are the Employees Provident Fund (EPF) and the Retirement Fund Inc (KWAP).
EPF holds 14.8% in the banking group and KWAP has a stake of 4.1%.
“The issue is that Public Bank shares are expensive. Even to acquire a 1% stake in the banking group, one would need at least RM850mil by rough estimates.
“The acquiring party must have an extremely deep pocket. Nevertheless, I doubt those inheriting Teh’s stake would want to sell the shares entirely.
“You don’t want to lose Public Bank’s attractive dividends,” a banker told StarBiz.
According to CGS-CIMB Research’s estimates, Teh’s stake carries a total value of RM20bil, based on the closing price of RM4.40 on Dec 12.
“Unless Teh’s stake is put under a trust or those who inherit the stake can work collectively to vote on important matters, we would see EPF becoming the single-largest voice in Public Bank and would have a stronger influence on the group’s future,” the banker added.
CGS-CIMB Research said Teh’s demise would lead to a material change in the shareholding structure of Public Bank with the potential emergence of new major shareholders.
“However, we do not have any knowledge on the arrangement by the late Tan Sri Teh for these shares.
“The possibility of merger and acquisition for Public Bank in the future depends on the plans by the person(s) who will inherit these stakes, in our view,” it said in a note yesterday.
According to Section 92 of Financial Services Act, individuals are prohibited from owning more than 10% stake in a financial institution unless they already held the stake before June 30, 2013.
As such, for the individuals who will inherit Teh’s stake in Public Bank, they cannot hold more than 10% stake per person.
Public Bank’s shares have remained stable in the past two days, despite the announcement of Teh’s demise during the afternoon trading session on Monday.
The stock closed at RM4.39 per share yesterday, down by one sen or 0.23%.
CGS-CIMB Research believes that the passing of Teh would not materially affect the outlook and strategic direction of Public Bank, as it is backed by a strong and experienced management team.
“In fact, Public Bank initiated its succession plan years ago when Teh relinquished his chief executive officer (CEO) position and was redesignated non-executive chairman of Public Bank on July 1, 2002,” it said.
Tan Sri Tay Ah Lek has served as the managing director and CEO of Public Bank since 2002, taking over the baton from Teh. The 79-year-old banking veteran is also a pioneer staff of Public Bank.
“The news (on Teh’s passing) could have a near-term knee-jerk effect on the share price of Public Bank but we foresee limited impact from this on the near-term earnings outlook of the bank,” CGS-CIMB Research said.
CGS-CIMB Research has an “add” call on Public Bank.
“We maintain our earnings per share forecasts for financial years of 2022 to 2024 and dividend discount model-based target price of RM5.20 for Public Bank,” it said.
The research house noted that Public Bank has one of the lowest credit costs among its peers. It also said that Public Bank may see a potential write-back in management overlay.
Fund manager Danny Wong told StarBiz that Public Bank’s fundamentals remain stable, going forward.
Wong, who is the CEO of Areca Capital, said that Teh has left a credible line-up of top management to steer the banking group even without his presence.
“Public Bank is a very retail bank and it has a loyal customer base. This would provide support to its business ahead,” he said.
On the issue of shareholding, Wong concurred that local institutional investors, particularly the government-linked investment companies, may increase.
In order to reduce systemic risk, local banks need to have a stable capital base.
“This can be achieved if banks are somewhat institutionalised (strong control by institutional investors).
“There is a possibility for local institutions to acquire Teh’s stake in Public Bank as they may want to preserve the bank from falling into foreign hands,” said Danny.
Teh began his banking career in 1950 and has 72 years of experience in the banking and finance industry.
After leaving Malayan Banking, Teh set up Public Bank in 1965 at the age of 35.
He has since overseen its evolution into a modern and integrated financial institution with a wide network of 265 domestic and two overseas branches.
The banking group is currently the second-largest company listed on Bursa Malaysia with a market capitalisation of RM85.4bil.
