KFH scale down Singapore operations

by Habhajan Singh
Kuwait Finance House (KFH) has scaled down drastically its Singapore operations just over a year after opening the subsidiary to tap into the region’s fund management scene, sources say.
It is understood that the regional operations for the Islamic bank’s fund management act ivit ies in the island-state would be brought back to Kuala Lumpur and handled directly by Kuwait Finance House (Malaysia) Bhd. In May 2008, KFH Malaysia had announced that its wholly-owned subsidiary, Kuwait Finance House (Singapore) Pte Ltd that it had received the go ahead from the Monetary Authority of Singapore (MAS) to commence its fund management activities. It is understood that the Singapore operations, manned by about a dozen staff, had been reduced to just one staff.
"I think they have been a little impatient with the results from their Singapore operations. Perhaps they had expected a little too much, too soon," an executive at an Islamic bank told The Malaysian Reserve.

This is just one of the recent apparent bumps in the operations of the Kuwaitibased Islamic outfit. In mid-December 2009, KFH Malaysia had pulled out from a RM920 million deal to purchase 50% of Menara YNH from YNH Property Bhd’s unit.
In a statement on Dec 15, YNH had told the stock exchange that KFH Malaysia had informed it ‘in writing’ on that matter, and that it may seek damages from the Kuwait-based Islamic bank. In an emailed statement a day later, KFH Malaysia had said that that there was "no legally binding agreement between KFHMB and YNH Land Sdn Bhd." Explaining the rationale of the move, KFH Malaysia had informed its staff that KFH Asset Management Sdn Bhd (KFHAM), which was established in 2008, would "act as the strategic platform for the KFH Group for Asia Pacific".

In the memo, seen by The Malaysian Reserve, KFH Malaysia said: "As such, this consolidation exercise will affect the KFH Singapore office, since there is a duplication of business functions. We have had to make a painful decision in the employee and resource realignment in Singapore, and to minimise our workforce at the KFH Singapore office.
"The move is a necessary adjustment to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency. With the KFH Singapore decision, we optimise our employee deployment."
The bank also told its employees that the company had appointed a ‘reputable outplacement company’ to assist affected employees to find news jobs who, it added, were give ‘severance pay and other benefits’ which were ‘beyond the legal requirements’.

On the decision to eliminate jobs, the internal memo stated that it was ‘crucial’ to its ability to adjust the bank’s cost structure, so that we have the resources to drive future profitable growth’.
The memo, dated Dec 12, 2009, was signed by chairman Shaheen Al-Ghanem and acting CEO Ab Jabar Ab Rahman. In a statement when the Singapore subsidiary was established, Shaheen had said that the move the establishment of KFH operations in Singapore was a ‘testament of our commitment in the Asia-Pacific region’.

(This story appeared in The Malaysian Reserve on 18 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)