KUALA LUMPUR, Jan 30 — Lembaga Tabung Haji (LTH) is not in danger of insolvency as long as depositors are not spooked into en masse withdrawals of their savings with the pilgrims fund, according to a local economist.

Questions about the fund’s financial standing were raised after a leaked letter showed Bank Negara Malaysia telling Tabung Haji last December 23 that its liabilities had exceeded its assets by a ratio of RM1 to 98 sen, a situation which means it is legally barred from issuing dividends and bonuses to its depositors.

“As long as everybody doesn’t try to withdraw all at once, Tabung Haji should be okay,” the unnamed economist attached to a local asset management fund was quoted saying by The Edge in its latest weekly paper.

The economist added that LTH’s asset shortfall was not worrying as it was a result of it paying out disproportionately high dividends to its depositors.

But the same economist quoted by The Edge questioned why Tabung Haji continued to pay high dividends when it was not supported by a similar increase in income growth.

“The point of having reserves is to smooth out fluctuations in returns from year to year. So, save in a good year, run it down in a bad year. But it seems like they have been running it down even in the good years,” the economist said.

According to Tabung Haji’s annual report cited by The Edge, the fund paid RM2.46 billion bonuses to depositors at a rate of eight per cent in 2012 despite a net profit of RM2.15 billion; in 2013, it paid RM2.632 billion in bonuses from a net profit of RM2.634 billion.

The fund again overpaid in 2014, issuing RM3.24 billion in depositor bonuses with only RM2.98 billion in net profits, or a rate of 8.25 per cent that is the highest since 1998, The Edge said.

In a separate report by The Star’s business section StarBiz, Tabung Haji’s dividends since 2012 was said to be split into an annual dividend and a “hajj bonus” dividend – with the latter only issued to depositors who have not gone on the Muslim pilgrimage.

The StarBiz report said most of Tabung Haji’s liabilities are in the form of its growing number of depositors, which meant that the fund’s asset value has to expand faster than the amount of money deposited with it.

It quoted an unnamed fund manager which said Tabung Haji could afford to beat the savings interest rates by Malaysian banks in the early 1990s with its average annual dividend rate of over 8.5 per cent per annum, due to the lower amount of deposits.

“But in the past six years its depositors’ savings have grown by RM30 billion. It is a predicament for LTH because the task is to grow its assets faster than the rate of deposits. Additionally it has to ensure strong investment returns in order to keep paying high dividends,” he said.

Tabung Haji’s average dividend payout rate in the last 10 years is at 6.2 per cent per annum, StarBiz said.

It said the fund is likely to have its total asset value exceeding its liabilities for the financial year 2015, based on a November 2015 sale of its London property believed to be valued at RM1.6 billion, its investments and possible revaluation of its other properties.

Tabung Haji’s investments include its stake in listed firms and ownership of properties – including Menara TH in the city centre, a few hotels in Saudi Arabia, and office buildings in UK and Australia, The Edge said.

On Tuesday, LTH told its 8.8 million depositors that they need not worry about the state of its reserves, saying that the BNM warning letter had not accounted for the fund’s investment portfolios such as its subsidiaries, plantation assets and properties in its letter.

Asserting that it has been performing well financially, LTH said its total asset value was higher than its liabilities throughout the 2014 and 2015 financial years when the fair value of all its investment portfolios is accounted for.

LTH also assured depositors that the dividend and bonus payouts will be made during the first quarter of the year without any delay, with the fund’s chief executive officer Tan Sri Ismee Ismail adding that he hoped to declare the bonus payout by early next month.

Copies of two letters issued by the central bank stating that the board’s reserves was in negative surfaced on the Internet on Tuesday, with the letter to Tabung Haji stating that Section 22 of the Tabung Haji Act did not warrant it to announce dividends and bonuses if its assets are less than its obligations.

Another letter to Minister in the Prime Minister’s department Datuk Seri Jamil Khir Baharom was to inform the minister in charge of Muslim affairs of the financial implications the matter would have on the government because deposits from the board were wholly guaranteed by Putrajaya.