The amicable settlement between the board of Alliance Bank Malaysia Bhd and its group CEO Datuk Bridget Lai on Feb 25 has brought a four-month corporate drama to an abrupt close. However, nothing was said on the outcome of the probe that is believed to have begun in October last year.

In a joint statement last Thursday, Alliance Bank and Lai announced that the latter would resign from the bank effective April 1 this year after stating that both parties had arrived at an amicable settlement.

The market had expected the Alliance Bank board to make an announcement on the outcome of the internal probe on Lai over issues involving the renovation of bank branches and sale of some properties and land to friendly parties. The settlement with Lai came as a surprise as the board was believed to be considering its next course of action after receiving Lai’s response to its query letter.

However, it is unsettling to find that after four months of investigations, no light has been shed on what really triggered the internal probe, and what the charges against Lai were. The joint statement made no mention of the probe.

Unfortunately, the internal probe has created an unnecessary distraction for the bank and may leave the CEO’s position vacant.

Temasek Holdings Ltd, which jointly owns 29% of Alliance Financial Group Bhd (AFG) with Langkah Bahagia Sdn Bhd via a joint venture known as Vertical Theme Sdn Bhd, is expected to choose a new CEO for the bank.

Interestingly, Lai isn’t the first CEO to resign from a banking institution that Temasek (through Fullerton Financial Holdings Ltd) has a stake in.

In January, while Alliance Bank was embroiled in its internal probe of Lai, another Temasek-owned bank PT Bank Danamon also saw the resignation of its CEO Sebastian Paredes. Industry observers say the resignation was sudden and that he did not give any reasons for his leaving. Paredes’ resignation will also be effective April 1.

In July 2009, Fullerton India Credit Company Ltd managing director and CEO G S Sundararajan announced that he would step down to pursue other professional goals.

Fullerton India, which is a unit of Fullerton Financial Holdings, is a leading micro-financing company in India.

The stepping down of CEOs in several of Temasek’s Asian banking units in recent years comes across as odd, industry observers say, as these CEOs have good track records and are credited with strengthening the banks’ operations. Temasek, however, declined to comment.

Lai, who was handpicked by Temasek to run the bank since 2006, has helped grow the smallish bank in terms of assets and bank branches into a decent and profitable consumer bank. Alliance Bank made a net profit of RM237.1 million in FY2009 and RM381.2 million in FY2008, compared with a net loss of RM171.8 million in FY2006. When her contract was renewed last September, it came with a 30% pay rise.

Bank Danamon, Indonesia’s fifth largest lender, is one of the leading micro-financing providers in the republic. Since Paredes’ entry into the bank in 2005, the bank has more than doubled its loan book and expanded its customer base from 2 million to 5.2 million, while its network grew to over 1,900 branches from 929. Bank Danamon’s net income of 1.53 trillion rupiah in FY2009 was flat compared with a year earlier.

Meanwhile, Sundararajan was roped in by Temasek in 2006 to establish micro-financing operations from scratch to over 800 branches, becoming one of India’s largest retail finance companies. Nevertheless, Fullerton India was hit by the global financial crisis due to its business model of extending unsecured loans, for which Temasek had to inject capital.

Sundararajan was replaced by Ruben de la Mora in October last year, but successors to Lai and Paredes have yet to be named.

The names of several prospective candidates for the CEO’s position at Bank Danamon have been floating around in the market, including that of former Bank Internasional Indonesia president-director Henry Ho.

However, banking analysts say Temasek may have other plans for its banking investments, and these include consolidating its banking assets under one umbrella, which according to the talk of the town is its 28%-owned DBS Group Holdings Ltd.

DBS has long said it wants to beef up its presence in India and Southeast Asia as part of its aspiration to be a leading pan-Asian bank. The banking group is also rumoured to have recently knocked on Bank Negara Malaysia’s door for a banking licence.

Nevertheless, industry observers say the recent developments in Temasek’s banking investments may be an indicator of more changes to its banking assets. For one, it is believed that Temasek may want to raise its stake in AFG to a more meaningful 30%. Industry observers say there is talk that the group may offer to buy EON Capital Bhd, and that this could be its first step in raising its stake in a local financial institution.

It will be interesting to see how Temasek puts into place its investment strategy.

This article appeared in Corporate page of The Edge Malaysia, Issue 795, Mar 1 - 7, 2010