DATUK Sulaiman Mohd Tahir, group CEO of AMMB Holdings Bhd (AmBank Group), sees opportunity in the midst of the current challenging banking landscape. And it is in these current turbulent times that he is charting a new growth path for the group.

“You have a situation (today) where the tide is low and you can see the roots, who are in trouble and who are not ... and you can pick up the clams,” says Sulaiman. His goal is clear — propelling AmBank Group into the top four banking groups in the country by 2020.

To do this, he has set forth two clear initiatives that will be done in parallel. One is transforming the bank and at the same time, focusing on new areas of growth that the banking group has identified.

“Our problem is NIM (net interest margin) compression, lack of profitability, governance and compliance. Let’s fix all these and translate them into opportunities,” Sulaiman tells The Edge.

“I’m not reinventing the wheel but I’m leveraging on the strengths that we have within. It is about running the bank better and subsequently changing the bank and using digital as a way of driving it. That is what we want to do essentially,” he adds.

To drive this transformation of AmBank Group, Sulaiman has brought in a new chief transformation officer — Goh Mei Lee, who was formerly with Accenture.

“Although I’ve been running it (transformation), it’s been tough. At least, with her coming on board, there is this independent person who advises me whether we are achieving the kind of numbers we want. The measurement to me is critical — it’s not because I’m a numbers man or because it’s a numbers game —more importantly, it’s to give visibility,” he says.

He also says he is injecting a pure meritocracy culture into AmBank Group.

“If they (staff) do well, they like to be rewarded. Yes, you can (get big bonuses), but you must also do your part. I have to be very clear — if you don’t work, you don’t get anything. We had our first bonus payout recently — so I’m clear. If you don’t meet the standards, you get zero — no half-month, no one-month. That’s the way it is,” Sulaiman says.

“If you’re serious about the kind of ambition we have, this is the first change that we need to make. We need to pay people who are contributing, who are delivering. We need to recognise people who want to do real work. And people who don’t, then they have to make a decision — do I move forward and change the way I do things and get better? Or, do I just have to jump ship? And that’s your call. I’m okay to lose people who don’t meet expectations,” he notes.

Sulaiman shares that AmBank Group’s strategy is about focus and leveraging resources.

Aside from Goh, he hired a number of new heads and talent for some segments, which include compliance, human resource and small medium enterprises (SMEs).

In June, he revealed four growth areas for the bank — mass-affluent, affluent, SME and mid-corporates. AmBank Group aims to be in the top four in each of its focus products — cards, transaction banking, markets and wealth management.

Sulaiman says the group is seeing some initial success today from this strategy, which it hopes will translate into results. He adds that it has “exceeded the budget” positively by 23%.

“I believe that what you see is the plateauing of our performance and hopefully, the pickup will come from the growth areas that we have identified,” he adds.

Another area that saw improvement is card acquisition, which hit the highest number in 10 years.

“We want to drive cards and merchants. Remember, MBF used to be the number one provider out there? I still have the base. It is kind of mature so I know who is good and not good. I have a new head of cards assigned. I’m seeing some good numbers coming out,” he says.

Another area is the bank’s CASA (current account savings account), which is seeing new merchants coming into the bank.

CASA is important to AmBank Group to improve its falling NIMs. Industry observers say the group’s weakness for the longest time has been its dependence on the interbank market for funding that has been compressing its margins. Its average cost of funds stood at 2.56% for FY2016 ended March 31.

“Our cost of funding is a bit high because our CASA is a very low,” Sulaiman says adding that the group wants to build its CASA.

This strategy to improve CASA is why AmBank Group is focusing on SMEs. It wants to drive the SME business through the branches as well as wholesale. “SMEs tend to place deposits with a bank. Many don’t have access to financing … because they have to use cash, they keep more CASA in their books compared to large corporates,” he notes.

At the end of June 30, 2016, the group’s CASA expanded in contributions to 24.5% of total deposits from 20.7% at end-March.

Sulaiman does not view the SME sector as a “risky” segment despite the current tougher operating environment.

“I look at it in the sense that the slowing down (in the operating environment) is a good thing. When things slow down, it is tough but it is quite transparent — you know which SMEs are not bankable, you know the balance sheet, you know what is going on … I should be able to choose the SMEs that I want,” he says.

Moving forward, AmBank Group has indicated that it wants to grow net profit by 10% per annum over the next two years.

“We gave you some indications of Patmi (profit after tax and minority interest) and it will stay at that. Loans growth — we think that we will grow [it] better than last year. If industry is doing 6% to 7% as a result, it will be near there. It is a far cry from before. We were flat for so many times and at one time, we were negative. When we grow, we grow in areas that we want to grow. That should give us better margins as a result. Clearly, it is a better performance than what we have done in 2015/2016 (March 31),” he says, adding that they are maintaining dividend payout at about 40%.

Sulaiman is optimistic going forward, despite the banking industry going through a tough patch at present, given the slower economic growth, decrease in consumer spending and the ringgit’s weakness.

AmBank Group saw its net profit for the first quarter ended June 30, 2016, fall 5% to RM323 million. Its net income was flat at RM2.06 billion versus RM2.11 billion in the previous year.

The drop in earnings was mainly due to higher other operating expenses of RM50.6 million and decrease in net interest income and Islamic banking business by RM31.2 million and RM9.8 million respectively. Interestingly, the group saw a writeback of RM36.2 million compared to an allowance of impairment of RM10.7 million a year earlier.

When asked if this writeback of impairments will be a trend moving forward, Sulaiman says no.

“These are things we can immediately do and control. One of the 63 initiatives that we have is opex (operating expenditure) control and how to improve our recoveries. We are seeing results in those areas, which is part of our strategy. Opex is something I can control ... I can say spend or not spend, so I can reduce. Recoveries — I can say work harder,” Sulaiman says.

“Hunting is a different thing ... getting customers excited. It is a longer process. I want to see the top line coming in (eventually). So now, we focus on the things that can come immediately, and building the processes and structures to deliver the future,” he adds.

On whether mergers and acquisitions are on the cards, Sulaiman says AmBank Group would like to be in the position to “acquire rather than be acquired”. There have been rumblings for some time now that the group could see some corporate exercises involving its major stakeholders.

“Being acquired is like dying. You get swallowed and there is no AmBank anymore. To acquire, you need to come from a position of strength. What are you good at? What are your synergies? When you buy over another entity, it is about what value it can bring.”

Sulaiman points out this is why the group should use its small size to its advantage. “The fact that we are nimble and small, we can make the changes faster … we can achieve the results faster,” he says. 

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