Today, the Minister in the PM’s Department confirmed that there is a RM4.1 billion shortfall in Tabung Haji. More worryingly, the problem is getting worse.
A PwC audit also revealed that financial engineering was used to enable dividends to be paid. TH management sold TH’s shares in Bank Islam Malaysia Berhad for RM2,551 million to realise a profit of RM553 million. They then bought back the same shares for RM2,688 million, incurring brokerage fees. The transaction lost RM137 million for the fund.
So in order to justify the dividend payments, TH did not mind losing more of the depositors’ money. This financial engineering was not disclosed in their financial statements.
TH also got their subsidiaries to declare dividends of RM510 million to boost up their profit but RM222 million remains unpaid, probably because the high dividend value is not sustainable.
The Cabinet has approved the setting up of an SPV to park and rehabilitate TH’s assets. The question is can the assets be turned around or there are more write-downs in the future.
The “best” news is that TH will now come under the supervision of Bank Negara to ensure a more prudential management of the fund and depositors’ money. Let’s hope there are no more such happenings going forward.