KOTA KINABALU – The Ministry of Finance Sabah has reinforced its commitment to the Sabah Development Bank (SDB) despite recent financial setbacks. Minister of Finance Sabah, Datuk Seri Masidi Manjun, assured that the RM5 billion in Non-Performing Loans (NPLs) held by SDB are secured and recoverable, primarily through land-based assets under active recovery.
In response to concerns following the bank’s announcement, Masidi stated, “I wish to reaffirm the State’s support to the Bank in times of need, particularly on our commitment to ensure that the bond obligations and repayment are kept whole. The Bank reflects the State’s financial standing and has an important role in the development of the State.”
Masidi informed the State Assembly that SDB is expected to announce an unprecedented loss for FY2023-2024, aligning with best practices and accounting standards. Despite this, he emphasized that the bank has always met its bond repayment obligations and possesses sufficient capital to honor upcoming repayments.
Following the announcement, SDB proactively engaged with key investors, depositors, and stakeholders. Masidi highlighted that the general response was one of understanding and support for the bank’s transformation plan, bolstered by the state’s strong backing.
The Ministry of Finance Sabah has also taken steps to support SDB’s financial stability. These measures include issuing letters to other Government-Linked Companies (GLCs) to place excess cash as Fixed Deposits with SDB and converting RM660 million of state deposits into Redeemable Preference Shares over the next few years to strengthen the bank’s capitalization.
Since the new Board and Management took over in the second half of 2023, SDB has made significant progress. The bank reduced GLC loan exposure from RM2.2 billion in July 2023 to RM0.7 billion and lowered bond obligations from RM5 billion to RM3.9 billion. The new leadership has implemented strict governance, reported alleged wrongdoing to the Malaysian Anti-Corruption Commission (MACC), and adopted industry practices and Bank Negara Malaysia (BNM) guidelines. SDB aims to recover RM1 billion annually over the next three years and plans to exit the Peninsular Malaysia market.
The bank’s mandate now focuses on pursuing economically and socially meaningful and environmentally responsible development projects within Sabah. It has approved RM616 million in loans for key areas such as Water, Power, and Infrastructure, while rejecting RM1.5 billion in loan applications that did not meet the new rigorous credit standards or fall within the mandate.
The State Government’s robust support aims to transform SDB into a development bank that serves as a cornerstone for Sabah’s economic growth, ensuring it remains a source of pride for the state and its people.
