Sunday, March 22, 2009

Feedback On Brilliant Bank Posting


Well, you never know which post would elicit the most responses. Readers of this blog would be aware that I don't get many messages, some would say its because I always whack those who post feedback. Sigh... nothing much will change I guess, but thats probably not going to change. The other posting which got the most responses before was when I whack Feng Shui, and now this on Brilliant Bank. My comments in purple.


19 Comments - Show Original Post Collapse comments

Blogger MK - don't know much, must learn more said...

G' afternoon Dali,

er.. is this hypothetical bank running around in the guise of being the public's bank?
worried

2:20 PM

MK, if you don't know, then you should not be investing in Malaysian stocks. ; )

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Blogger value investing in malaysia said...

Agree with u.

The fund mgt unit is certainly supporting its parent company. another thing is the brilliant bank is the best performing bank in the country, hence the inclusion is somewhat necessary and logical.

But one more issue arises!

“There will come a time, if and when Brilliant Bank digs a hole in some financial exposure, and say loses 70% in value over a short period of time.”

At this time, will the fund mgt unit buying more shares of brilliant bank and be seen as supporting the latter share price - like shares buyback but by a subsidiary?? And do they disposed the brilliant bank shares when it is overpriced? Maybe you can check the changes in the funds report if you want to know the real answer.

Time will tell.

2:48 PM

Value investing, pls do not misunderstand me... I do not want Brilliant Bank to fail, I want the bank to continue its excellent ways, just clean up this time bomb, its not halal.

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Blogger yj said...

Another POnzi Scheme ?..

3:49 PM

yj, no, this is not a ponzi scheme, lets not get carried away, the Brilliant Bank is a good bank, they just need to come clear and restructure the holdings a bit better n more transparency please.

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Blogger Shadow said...

Wont it be great if this Brilliant bank is also supported by a Brilliant Stockbroking Co (another fictional 100% owned subsidiary). The fund management unit then channels the maximum allowable trade to this subsidiary. A great strategy since the stockbroking unit would not have done well except for the support of the subsidiary fund management fund size... and the commission generated is then captured under non interest income for Brillant Bank (Every bits help to get the highest ROE, ROA, etc).

Just a thought. To maintain the highest capital adequacy ratio that you mentioned. Brilliant Bank in theory may call for rights issue (some innonative tier-1 capital?), which may send the share price downwards by say... 20%, and to make things more interesting, wont investors be asking why their funds invest in 10% of the total NAV on a single related company?

Thought i might just spice up the story on this fictional bank!

3:51 PM

shadow, again, this is not something sinister (yet), just a pre-warning that Brilliant Bank needs to do some thing about it.

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Blogger see said...

Whoa! this brilliant banks sounds familiar. Have always wondered how they keep their NPL so low year after year - for real ah? From my experience their fund mgt also in shroud of secrecy - won't let 3rd party investment advisers even sniff around their funds

4:02 PM

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Blogger GreenTea said...

Good Day Dali,
You are not the only one who is suspicious of the consistent perfomance of this bank. One well known top financial analyst told me to be careful of the said bank 2months ago. Hope this is not another Ponzi Scheme!

5:04 PM

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Blogger Implosion said...

Brilliant bank may well be operating in a country without clear rules of corporate governance or an independent body that acts as a watchdog. That being said, what's the worse that could happen to this said fictitious bank? Government intervention?

8:11 PM

Implosion, the worst would be the Securities Commission highlighting the issue publicly and forcing them to be transparent and/or reduce their weightings on Brilliant Bank's own shares. Its not so bad, no danger of catastrophe here.

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Blogger Chowpiao said...

My only comment/favourite : Eventually all shit will float!

11:15 PM

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Blogger xatomic said...

haha time to short it then

11:43 PM

xatomic, I don't think this is reason enough to short the Brilliant Bank.

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Blogger elizabeth said...

I hope this fictional story has a happy ever after ending.... if not, kaput lah kita!!

1:41 AM

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Blogger Shawn Cheng said...

I know which bank you refer to. Unfortunately I also have some monies invested in their fund. Judging from their annual report, they indeed used the money from the fund to invest in parent company. Do you think that we all in deep shit this time? If that's the case, then I think a lot of Malaysians will kaput, not only Elizabeth...

7:17 AM

Shawn, I don't think things will combust, it is still the best managed bank. Please don't run ahead of yourselves.

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Blogger Moolah said...

My dearest Dali San,

Wasn't this the small bank that was shorted by some mad lembu at around 10 bucks?

:p2

10:43 AM

Moolah, Good call to short at 10, but like I said, this is not reason enough to short. You may short Brilliant Bank if you think their NPLs is under provided, if you think their rights issue will be under subscribed, if you think investors already put in too much premium into its share price, etc...

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Blogger Ng said...

Good morning, I have been following your blog for quite some time, would like to ask u for some advice.
Has been investing in Malaysia equity since Nov '08 (MBB, IOI, Genting & AMMB)
Do u think is a good idea to liquate the position and invest in Singapore or HK. Lately losing confidence in the govt and the state of the economy. Our market has been extremely quiet & it seems foreign long term funds are ignoring this market.

11:57 AM

Ng, recent weeks saw Asian funds having the lowest weighting in Malaysia and Taiwan, hence foreign funds are not back yet... they still prefer HK, China and Thailand... need to monitor the weekly foreign funds Asian country weightings to get a better pulse on the markets... while Malaysian stocks are OK in value, the other factors such as liquidity, currency outlook and catalysts are not there yet

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Blogger Maverick said...

Fully agree Dali, I did notice this in the past, quite worrysome.

The other strange thing is the unbelievable number of funds they have. I can think of a Malaysian equity fund, Malaysian bond fund and some international funds, but they have literally dozens and dozens of funds. Some of these funds have names that dont cover the contents at all. And yes, the largest holding in most of these funds is indeed by far ...... "Private" Bank.

1:02 PM

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Blogger CP said...

Hi Dali,

Hearing what others have said, it is just confirming some 'rumours' I heard from my best-of-friends working at the HQ.

Wonder if there is any worry parking our money, and not buying its stock, I mean.

Enlighten us. Thanks.

TEH

4:36 PM

Teh, Brilliant Bank is still the best bank in the country. There is no danger if you have money in deposits. Its guaranteed by Bank Negara anyway (up to a limit).

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Blogger solomon said...

Interesting. We need some tree shakers like you to alert those enforcers. Actually no lah, it could be well a fictitious and coincident story.

By the way, just in any detective story, not all enforcers are good to smell this out because they are not in the industry long. Or too long in job until they are out of touch??

Like a democratic country, you have division of executive powers. Do you need that in a company?

4:56 PM

Solomon, I would blame the directors of the fund managemnt company, they should be well aware of this issue.

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Blogger iamyuanwu said...

It's an open secret. I didn't notice it until I invest in Brilliant Funds and eventually became a sleeping agent.

Also Brilliant Bank's huge dividends help prop up Brilliant Funds performances.

Definitely a conflict of interest, and if 1 entity fails, the other will be dragged along with it. I'm gonna question my 'agent' about it.

Lets hope it ends like a Disney movie.

11:40 PM

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Blogger WY said...

Hi Dali,

Your article is a good read. You have valid points here.

Some opinions:
1. I wonder whether the fund management business's transactions are considered as related parties transaction. If it is, guidelines on related party transaction can be used.

2. In unit trust's prospectus, there are restrictions on how much % of the fund can own a single company. This may be a guideline to use. I wonder how effective regulator is enforcing on this %.

3. Probably there should be a law for Bank to own certain % of their own fund management arm to align interest. Much like Warren Buffett owning his own stocks of Berkshire Hathaway.

Question:
1. You mention about equity linked funds. Do you know whether the fund is formed using equity-linked swap ? has to be extra vigilant on swap..

8:22 AM

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Blogger ning said...

the brilliant bank already benefited from the very first stage by getting CHEAP capital channel from its fund management arm, without the needs to call for right issues and issue of bond which definitely pay a higher interest than dividend payout.

during the peak of the market, brilliant fund launched quite a numbers of new fund! a lot of malaysians sudah kaput...

3:22 PM


p/s photos: Fann Wong

6 comments:

rask3 said...

Hi,

It is difficult not to make money in banking unless the banker is stupid/greedy/dishonest. On the consistency of Brilliant Bank's performance, well, earnings can be managed using accounting devices such as liberal/restrictive loan loss provisioning.


It is legal, although a management that relies heavily on such devices is definitely not owner oriented and therefore suspect. In this case, since the payout ratio is large and consistent, I do not suspect the realness of its earnings.


As regards Brilliant Mutual's heavy investements in its parent company, the conflict of interest has to be resolved. Besides the individual fund's limit on exposure to a single company another limit should be instituted on the sum total of exposure of the various funds. Say 10 to 15 per cent of the parent.


Too much of a good thing sometimes turn out to be not so wonderful.

CY said...

Hi Dali,
I am writing to tell you that the Sam Hui's songs you put up are just great! I think these are Sam's gems that are not so well known to most listeners unlike his more 'commercialized' songs. Is there a way I can download all those songs in your jukebox? Thanks.

Salvatore_Dali said...

CY,

I am glad someone recognised the not so popular Sam Hui's songs... these are very reflectful n songs that sighs along with yr heart.

you should sign up with imeen and then you can favourite mark my playlists n it will appear in yr playlist as well.

Moolah said...

My dearest Dali San,

Then and now rather different. To short it now... takes much greater set of balls, and you know too well, I don't have it.

:p2

value investing in malaysia said...

Same with me. I still hope can get a chance to buy brilliant bank stock at the right price.

Is there any regulation that say any individual/corporation can own up to a certain percentage of a bank in malaysia? Like in US, d limit is 10%.

Michael Tsen said...

i m not quite sure if this is Public Mutual, if it is then yes I like the old KL Mutual so much more. But I have no complaints against two great guys work together ... I was just saying this morning to put all money back in PBM for the spread of next 1-2 years. I would expect about 15-30% compound return around 2016 thereable +- 3 years. Like you say, keep scratching my back and I will scratch yours :)

if shit pours then we run, its not like we haven't kena shit else where ... its matter of where has less chance of smelly shit ...