Published March 31, 2009

CIMB offers unpaid leave to 36,000 staffers

Malaysian investment bank moves to cut costs in slower business environment

By S JAYASANKARAN
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

IN a sign of the times, Malaysia's largest investment bank CIMB has asked its 36,000 employees in eight countries including Singapore to consider taking 1-6 months' unpaid leave.

CIMB is the first Malaysian bank and, indeed, the first large local company to do so, with the move primarily aimed at cutting costs during the global economic slowdown, group chief executive Nazir Razak said yesterday.

Mr Nazir said the offer was made last week to all staff in the country's second-largest lender, CIMB Bank, as well as its units BankThai in Thailand, PT Bank CIMB Niaga in Indonesia and CIMB-GK units in Singapore and elsewhere.

'In the slower economic environment, we are looking at ways to temporarily reduce our costs,' Mr Nazir told reporters. 'The reception from our staff has been very, very good,'

The bank's pre-emptive move - dubbed a 'rejuvenation' exercise by CIMB executives - is likely to be followed by other companies in Malaysia but not necessarily by other banks as the lender is largely investment bank-driven and so its staff costs are modelled on Western systems with pay packets tied to performance targets.

'A lot of their people aren't going to get their bonuses anyway because it's going to be a slow year with not much business going around,' an industry executive told BT. 'So they might as well take some time off.'

The move also reinforces the notion that Malaysia has tipped into a recession - an event that makes banks especially vulnerable. During such times, the non-performing loans (NPLs) of financial institutions begin rising because of loan defaults and while the balance sheets of almost all Malaysian banks remain healthy, the question on the minds of most analysts is the magnitude of the damage.

In that context, Malaysia's central bank recently announced the revival of the Corporate Debt Restructuring Committee, a unit first set up in 1998 to mediate in loan disputes between corporations and financial institutions.

CIMB has already begun seeing the effects of a slowdown with net profit for the year to Dec 31, 2008, declining 30 per cent to RM1.95 billion (S$818 million). But analysts don't seem worried. 'Is it profitable?' asks Chris On, the head of JPMorgan in Kuala Lumpur. 'Yes. And no, it's not in trouble. Could NPLs rise? Conceivably, but no one thinks it will get to the stage of 1998.'

Indeed, CIMB set the stage for cost cuts early this year when staffers at its CIMB-GK units in Singapore and elsewhere voluntarily accepted pay cuts of between 10 and 20 per cent. A CIMB staffer told BT, however, that the proposal came from CIMB-GK itself and wasn't a top-down directive from Kuala Lumpur.

An industry executive who knows Mr Nazir said that the banker was opposed to retrenchments as a matter of principle and that the current exercise should not be construed as one because all staffers who took the leave option would be assured of jobs when they returned.

Indeed, Mr Nazir appeared taken aback when asked by reporters if this was a prelude to layoffs.

'How can this possibly be called a layoff?' he responded. 'We are not instructing anyone to do anything. We are just giving them an option to apply if they wish to take an extended break. Don't interpret it any other way.'

CIMB is listed under Bumiputra Commerce Holdings Berhad. The stock closed at RM6.90 yesterday, down 15 sen.