Aiming to be Top 4
F Saad 
AmBank hopes its four-year transformation programme will see it surface as one of the four top banking groups in the country

AMMB Holdings Bhd (AmBank Group) is on track to achieve its goal of being among the top four banking groups in the country by market capitalisation. It is currently the sixth largest.

This will intensify competition in the local scene as other banks up their ante for market share amid a challenging economy.

Meantime, banks are also gearing up for a changing world banking landscape. By 2020, growth of banks will be governed by key factors such as product penetration, changing consumer tastes, e-wallets and new regulations.

As for AmBank group, it has gone past a recently failed merger exercise and is now banking on the firm foundation it put in place through its transformation programme called Top 4.

Driving this journey are its founder and chairman Tan Sri Azman Hashim (who many in banking circles consider a “builder”) and group CEO Datuk Sulaiman Mohd Tahir.

Sulaiman, who joined the bank in November 2015, is confident AmBank can leapfrog its rivals to become among the top four banking groups in the country.

The bank is in its second year of the four-year transformation programme which it announced in May last year.

Achieving this goal is crucial for AmBank, should Bank Negara Malaysia (BNM) decide to consolidate the banking industry.

Its top four growth segments are mass affluent, affluent, small and medium enterprises (SMEs) and mid-corporate.

AmBank’s four key products are cards and merchants, transaction banking and payroll, markets, and wealth management, while its top four existing engines are corporate loans, debt, capital markets, and fund management.

“In the first year, we put the infrastructure and processes in place, while the second year onwards was about growing from there.

“It’s about sustainability, staying away from volatility, and providing the most to our customers.

“I am pleased with the progress. We are now driving improvements within the group by linking all our capabilities.

“Right now, we have eight banking groups but if BNM seeks to consolidate the banks, we think a good number would be four or five.

“We need to be in the top four [by 2020]. Right now, we are sixth [in terms of market capitalisation],” Sulaiman tells FocusM.

AmBank’s recent proposed merger with RHB Bank Bhd would have catapulted the merged entity into the top four with combined assets of RM371.5 bil.

However, the deal fell through in August after three months of deliberations.


New hires

This year has seen a hive of hiring at AmBank, with new additions to senior management positions as well as new hires to bolster the performance of growth segments.

The group has 11,500 staff across all divisions, including 300 hires for its newly-launched business banking segment under Christopher Yap.

Says a banking observer: “Other banks announced their transformation programmes much earlier, but it’s better late than never.

“What is important is the content of the plans and how the group will grow.

“The industry is not the same as it was even 10 years ago, and banks have to change the way they continue to do business.

“Customers today have very different needs. In the past, it was mainly about getting more business and having a wider reach. But the market is very saturated now.

“It is no longer about getting more customers, but about generating more from your existing base and making full use of the resources at hand.”

AmBank spent RM500 mil on new infrastructure and a single platform to facilitate cross-selling of the group’s various business units.

With a single platform to link all its businesses, Sulaiman says the results will be fully reflected in two years.

“We are growing in the right direction, like in credit cards, SMEs, the affluent and mass affluent segments.

“We are also capitalising on our fixed deposits and linking them with wealth management products.

“Fixed deposits used to be about RM2-3 mil a month but that has gone up to RM100 mil a month.

“In retail deposits, we are expecting 20% growth this year. Choosing the sectors and products that you want to grow has given good results,” he says.

AmBank’s cards business has also increased, pulling in 20,000 new card issues a month, largely thanks to its BonusLink Visa Card.


SME business

One of the main segments identified for growth is SMEs, which are categorised under business banking.

Before the transformation programme, AmBank was a laggard in the space. But now, that segment has turned into its identity.

“We like to think of ourselves as an SME bank, where we see solid numbers. In [SME] loans we have grown about 16-17% this year.

“When we did not focus on driving this segment, we had negative growth. Now the figures are positive.

“We’ve created a specific segment for this, where we have 55 branches and 20 commercial banking centres to cater to SMEs.

“Now, we are seeing loans growth of about RM1 bil per quarter just for SMEs and that too on a portfolio of RM12 bil. The amounts are smaller, so the risk is more manageable,” he says.

SMEs are the big thing in the industry now, with banks announcing programmes catering to this specific segment.

“We noticed the banks serving SMEs were mainly foreign ones. The larger local banks were usually retail ones with a small segment for SMEs.

“With the kind of customers that we had and our reach, we saw there was an opportunity to succeed in the SME space.

“I don’t think other banks have as many SME centres as we do. We aren’t that big, but we aren’t that small either. This allows us the resources to focus on the segment.

“SMEs are a different breed. They require a personal touch and help to grow their businesses.

“It’s a very competitive segment, but there is a chance to grow. We want to be known as the bank SMEs come to for anything they need,” says Sulaiman.

AmBank bought MBf Holdings Bhd’s credit card business unit, MBf Cards Sdn Bhd for RM623.4 mil in 2012, giving it access to more than 53,000 SME merchants.

But it wasn’t until recently that the bank was able to tap the potential of that customer base.

Last year, it completed the migration of MBf cards to its platform. A complete transformation also meant breaking away from tradition.

AmBank used to be a big name in the hire purchase market, but over the past three years, it decided the margins were not sufficient to justify being a leader in the segment.

Hence, it decided to drastically reduce its portfolio by RM3 bil. As a result, its gross non-performing loans (NPL) gradually dropped to 1.6%, according to the bank’s 2017 annual report.

As at end December last year, CIMB Group Holdings Bhd had a NPL ratio of 3.3%, RHB Bank 2.4% and Malayan Banking Bhd 2.3%.

“We intentionally reduced business from that side, because the hire-purchase industry changed, and the portfolio’s profitability dropped.

“When ANZ came in as partners, we looked at the hire purchase market and decided to reduce the business in the segments where margins were not so good. As a result, our NPLs dropped.

“We are still active in the segment, but not as aggressively as before,” says Sulaiman.

AmBank is not actively seeking merger and acquisition opportunities at the moment

AmBank was also widely known as an investment bank – a legacy from its earlier days. And it is ranked among the country’s top three in terms of assets under management.

While business in H1 is traditionally slow, Sulaiman is confident H2 will be better.

As at FY17 ended March 31, total assets under management increased 3% or RM1 bil to RM37.2 bil. It was led by shariah-compliant inflows.

AmInvest is the market leader in the fixed income unit trust sector with a market share of 14.2%.

Most of the spending on new infrastructure was done in 2015 and last year. And, as a result, it pushed up the bank’s cost-to-income (CTI) ratio by 13.1% to 58.8% last year.

The figure has since been reduced to 57.2%, and Sulaiman says a further reduction can be expected once revenue from new businesses are reflected.

“When you build new infrastructure and hire people, the cost is a bit high.

“Loans growth is there, but the revenue from that has not been reflected. We foresee that as we drive up revenue, it will push the CTI down.

“That will take about one or two years. We think 48-49% is a good target. These days, a lot of investment has to go into upgrading systems, education and compliance, not like in the 80s.

“We have 50 people in our compliance team. All banks these days spend a lot on compliance,” he says.

The industry average for the CTI ratio was 46.3% as at December last year.


Good progress

For Q2 ended Sept 30, AmBank group reported a net profit to RM331.47 mil against RM352.63 mil in the previous corresponding quarter.

Revenue stood at RM2.13 bil, up 0.9% from RM2.1 bil previously. This was supported by a higher net interest income of 9.9%.

In an Aug 28 report, a Hong Leong Investment Bank analyst says: “We feel that AmBank is showing progress towards its Top 4 aspiration by 2020.

“SME loans spiked 19% on an annualised basis while further net interest margin recovery is in sight, owing to the gradual shift from fixed deposits to the current account, savings account.”

The last two years have been tough for the AmBank group. Former managing director Ashok Ramamurthy left in early 2015, and it was without a replacement for nine months before Sulaiman joined.

The bank also had to contend with the repercussions of RM53.7 mil in fines for breaching the Financial Services Act 2013 and the Islamic Financial Services Act 2013.


Looking ahead

But Azman says all that is behind them now, and it is clear skies ahead.

“We feel we are past that and moving forward. We’ve paid our dues. It’s not interfering with our business and the measure of how we are performing as a bank is in the numbers.

“Investor confidence will come when the figures are there. The platform for growth and sustainability is already there,” he says.

The proposed merger with RHB, which would have catapulted the merged entity into a top four position with a combined RM371.5 bil in assets, fell through in August after three months of deliberation.

Without giving specific reasons, both banks said they were not able to reach an agreement.

AmBank is not actively seeking merger and acquisition opportunities at the moment.

“It would have been good for the industry, but now that it’s off, we are ok on our own. Before the merger, we did a lot of changes to the organisation.

“Now that the merger is behind us, we can move forward with our plans. We were happy we called off the merger talks early because we did not want to affect staff morale.

“However, a merger would have resulted in higher positions for many of them,” says Azman.

ANZ, which holds a 23.7% stake in AmBank Group, has been a partner for more than three years. ANZ has been actively paring its stakes in the region as part of its own cost rationalisation programme.

In the proposed all-share deal, RHB was to have merged with AmBank, with ANZ retaining 10% in the merged entity.

Several major institutional names have been mentioned as possible suitors for the ANZ stake, including retirement fund Kumpulan Wang Persaraan (Diperbadankan).

The stake is still up for sale, but Azman says the future partner will have to tick all the right boxes and be actively involved in the business.

“ANZ has announced that it wants to sell its shares, so we will think about who will be our partner in the future.

“We will have a say when an offer for its shares is made. Any new partner coming in will have to obtain BNM’s approval.

“That, in a way, ensures the party coming in will be able to contribute positively to the group,” says Azman.

The bank’s takaful arm AmMetLife Takaful (under AmMetLife Insurance Bhd) is on the lookout for a general takaful licence through acquisition as BNM is not issuing new licences.

MetLife International Holdings became a business partner in 2014.

“Our takaful life business is still very small. Now with our partner MetLife, we are building the business through bancassurance.

“We are always on the lookout for general takaful licences. The only way to get a licence is through an acquisition,” says Sulaiman.

The man who built a bank

VETERAN banker Tan Sri Azman Hashim, 78, considers himself a “builder”. He entered the banking industry over 50 years ago and has been building the AmBank group from the ground up, sometimes through acquisitions. In his own words, “Its about building something that can thrive”.

Azman founded the banking group in 1982 and in a period spanning four decades, developed it into a major player.


His 12.97% stake in the bank is valued at RM1.63 bil, making him one of the richest bankers in the country.

He joined Bank Negara Malaysia (BNM) in 1960 and left in 1964 to run his own accounting practice, Azman Wong Salleh and Co from 1964 to 1971.

Being on the board of Malayan Banking Bhd (Maybank) from 1966, he was also its executive director from 1971 to 1980.

From 1980 until 1982, he was executive chairman of Kwong Yik Bank Bhd, a Maybank subsidiary, when he acquired AmInvestment Bank Bhd which he eventually grew into AMMB Holdings Bhd (AmBank Group).

Known as the “singing” banker, he often entertains staff and guests at company functions.

Azman shares his thoughts with FocusM:


FM: What do you think your lasting legacy will be for the bank and for the industry as a whole?

Azman: Perhaps, I am also considered as a “builder”. I entered the banking industry over 50 years ago, beginning with BNM, Maybank and then the AmBank Group.

Since then, I have been building it from the ground up, growing the business internally and through acquisitions.

Looking back, I have come to realise that this has always been more about building something that can thrive, and drive the group to success.

As for the industry, education has become a passion of mine.

I currently serve as the chairman of various associations (many for decades) including the Asian Institute of Chartered Bankers, the Malaysian Investment Banking Association and the Asian Banking School. I sit on the board of the Asian Institute of Finance too.

These entities are collectively committed and involved in efforts to raise professional standards within the banking industry and improve banking quality as a whole.

This year and next, you will transit out of AmBank’s subsidiaries and reduce your responsibilities. How is your progress thus far?

The transition is proceeding smoothly as planned and as part of our succession planning strategy.

One thing to note is that I will only be stepping down from my roles within the operating entities.

I will still remain chairman of AMMB Holdings and maintain oversight on all entities within the group in terms of performance, activities and progress.

In this capacity, I will continue to focus on the strategic growth of the group as a whole.


Can you reveal your succession plan? What role will your children – Shalina and Shahman – play in the bank in future?

Shalina and Shahman are in the holding company, Amcorp Group Bhd.

This company owns shares in the bank, Amcorp Properties Bhd and RCE Capital Bhd (both listed companies) where they are chairmen respectively.

My children are not involved in the bank and the most likely reason is they are not keen to be in it.


You have had a long and illustrious career. What was the most challenging moment in your banking career?

The banking sector was deeply affected by the 1997-1998 Asian financial crisis. As a result, the government considered consolidating the number of banks in the country, reducing it to just six.

We were one of the banks in the consolidation exercise. We were assigned to be taken over by a smaller bank.

If the takeover had gone through or done successfully, AmBank Group and I would no longer be around!

Fortunately, the government decided to raise the total number of banks to 10, so we did not have to go through with the merger.

More importantly, AmBank made a successful recovery in its financial performance the very next year and recouped all its losses. We continued to grow ever since.


What is the difference between the banking sector in the 80s and now?

The banking sector has grown and evolved tremendously over the years.

Back in the early days, the economy and the nation grew rapidly, and the industry alongside it. AmBank’s focus was very much on growing our reach.

Of course, times have changed now. We have disruptions in the form of new technology and digitalisation that we must adapt to.

Banking regulations cover a wider area. They are stricter today, and rightly so.

This is not a negative development as it does not bog down the growth potential of a bank. Stricter compliance improves disclosure and credibility, and thus heightens efficiency.

Investments must go into upgrading systems for end-to-end monitoring and training staff to recognise possible risks.

On the brighter side, we can offer customers greater security and peace of mind, given the better systems and talent in place.


How do you to see the banking industry in the next five years?

At the end of the day, the financial and banking industries cater to a fundamental need.

People will always need financing, and as a result, the banking sector will continue to perform.

The group has put its Top 4 strategy in place, and we are working hard to be among the top four banks in the country by 2020.


Are you still looking for a new buyer for your stake?

Not at this juncture. 

Taking up the challenge

WHEN Datuk Sulaiman Mohd Tahir, 53, was appointed group CEO of AMMB Holdings Bhd (AmBank Group) in November 2015, it was a tough year for the banking industry.


AmBank had also been without a CEO for nine months before he came on board. But he has warmed up to the task of helping drive the bank to be among the top 4 banking groups in the country by 2020.

And, his experience does count. He was CEO of CIMB Bank Bhd and has 28 years’ experience in the retail banking industry.

An accounting graduate of the Royal Melbourne Institute of Technology (RMIT) in Australia, he joined the CIMB group in 1987.


FM: How has it been since you joined the AmBank Group?

Sulaiman: The past two years have certainly been eventful, but at the same time extremely fulfilling.

This has been a time of growth, change and transformation for the bank. We have been focused on running the bank better, and I am pleased to say that we are already seeing our efforts bearing fruit.

Of course, I have been very fortunate to have Tan Sri Azman’s guidance. It has been good to have his support in implementing our new initiatives.


What has been your biggest challenge during this period?

People management will always be one of the toughest parts of any job. Change is never easy to accept and adapt to, especially for those who have grown accustomed to a certain way of doing things.

When I first joined the group, the bank had been without a group CEO for some time, and it had been through a tough year.

Timing was also a challenge as I had joined in end-November and the group began a new financial year in April.

We had to come up with a solid plan of action for the group within the span of a few short months. And I am proud to say we overcame the challenge.

We delivered our transformation and Top 4 strategy in March last year, and since then we have been seeing positive results.


The industry is increasingly competitive and margins are shrinking. How will AmBank stay ahead of the curve?

Our Top 4 strategy is in place and we are committed to driving the group further.

We are focused on strengthening our digital banking segment, which includes looking at analytics and behaviour-driven offerings, and providing more customer targeted products via our mobile app.

Beyond digital, we are also looking to accelerate our growth in the business banking segment.

We have developed four separate categories for SME banking, as we understand that the sector is diverse and cannot have a “one-size-fits-all” solution to their needs.


Are there any merger plans in the pipeline?

At this juncture, there are no concrete plans to merge with any one entity. Our current focus is on growing the group organically. 

This article first appeared in Focus Malaysia Issue 261.