Sarawak Premier Tan Sri Abang Johari Abang Openg (left) and Affin Bank CEO Datuk Wan Razly Abdullah Wan Ali. (Photo by Zahid Izzani/The Edge)

KUALA LUMPUR (JAN 31): The Sarawak state government plans to raise its holding in Affin Bank Bhd to around 30%, which would result in it overtaking the Armed Forces Fund Board (LTAT) as the banking group’s largest shareholder, sources said.

LTAT currently holds a 28.79% equity stake in Affin Bank while its wholly-owned unit Boustead Holdings Bhd has a 20.02% stake, Bloomberg data shows. The lender’s second-largest shareholder is Bank of East Asia Ltd, with a 23.93% stake.

Sarawak, via its investment arm State Financial Secretary Sarawak, currently has a 4.8% stake in the bank.

“[Sarawak] intends to be the biggest shareholder. [It] plans on acquiring Boustead’s entire 20% holding and a bit of LTAT’s as well, which will then raise its total shareholding to around 30%, subject to Bank Negara Malaysia’s approval,” a source told The Edge.

It is understood that the parties have agreed on a price that they consider to be a “win” for each side and had earlier this month written to Bank Negara Malaysia to seek its approval for the proposed transaction. The approval is pending, a source said.

The parties, however, continue to be in discussions on “smaller” issues, including how many board seats Sarawak would be entitled to in the bank, a source said.

Under the Financial Services Act 2013, a party would need Bank Negara's approval to acquire any multiple of 5% stakes in a bank, according to an analyst The Edge spoke to.

Affin Bank CEO Datuk Wan Razly Abdullah Wan Ali declined to comment for this story, saying it was a shareholder matter. Boustead could not immediately be reached for comment.

At a press conference here on Tuesday in conjunction with Affin Bank’s market outlook event, Sarawak Premier Tan Sri Abang Johari Abang Openg, who was the guest of honour, said the state government was “close” to concluding negotiations with LTAT to increase its stake in Affin Bank.

“Dekat (close),” Abang Johari said, when asked when the state was expected to finalise the planned acquisition.

Wan Razly, meanwhile, told reporters that discussions between the Sarawak state government and LTAT were still ongoing and that once things were finalised, either Affin Bank or the state would make an announcement.

When asked why Sarawak, unlike other states, was keen on owning a stake in a bank, Abang Johari recounted how as many as six banks had originated from Sarawak in the past, including Bank Utama and Wah Tat Bank.

“When there was a policy [by the federal government] to merge all these banks [post Asian Financial Crisis], our banks were all swallowed by the big banks, if I can use the word ‘swallowed’. We feel like we need a bank in order to boost our SMEs and also business activities in Sarawak,” he said.

Affin Bank’s share price has jumped in the last few weeks in anticipation of Sarawak raising its stake in the country’s second-smallest of eight banking groups. The stock has gained 29.7% since Dec 19, closing at RM2.62 on Tuesday — its highest in over five years — for a market capitalisation of RM6.15 billion. Its shares gained 12 sen or 4.8% from Monday's close, off an intra-day high of RM2.70.

At RM2.62, Affin Bank is valued at a price-to-book of 0.55 times, the lowest among its peers, despite the recent share price rally.

The State Financial Secretary Sarawak bought its current stake in Affin Bank in April 2023 for RM1.97 per share or RM221.74 million in total.