KUALA LUMPUR: The following is an excerpt from an exclusive interview with AMMB Holdings Bhd group chief executive officer (CEO) Datuk Sulaiman Mohd Tahir and AmBank Islamic Bhd CEO Eqhwan Mokhzanee Muhammad.
Q: Please tell us about AmBank’s Top Four strategy and its progress so far.
Sulaiman: Our top four growth segments are mass affluent, affluent, small and medium enterprises (SMEs), and mid corporate. Our four key products are cards and merchants, transaction banking and payroll, markets as well as wealth management. The top four positions of our existing engines are corporate loans, debt and capital markets and fund management. We also aim to be among the top four employers in Malaysia.
With our four-year strategy, our end goal is clear, we want to run the bank better and to change where needed.
Changing with the needs of the time is crucial, given the banking landscape is dynamic and transforming at an exceptionally rapid pace. The strategy we have in place allows us to chart the path towards a stronger banking entity leveraging on our solid 41-year track record. Our four-year strategy was developed following an intensive seven-week process, which involved focus groups, discussions with staff, senior management and directors as well as sessions with customers. We want to achieve our aspirations in all the areas.
Q: In which areas is AmBank performing?
Sulaiman: We are currently in the top four in Malaysia in investment banking, corporate banking and funds management. As per our Top Four strategy, we intend to sustain our performance in these areas. We are looking to further penetrate the SMEs and mid corporate segments as well as the mass affluent and affluent segments. There is also opportunity for us to expand our cash management segment by cross-selling our other products to existing customers. Again, these are all part of our Top Four strategy.
Q: What is AmBank Islamic’s contribution to the group’s bottom line?
Sulaiman: AmBank Islamic currently contributes 19 per cent to group revenue. Our aim is for AmBank Islamic to increase its contribution to group revenue to 24 per cent by 2020, which translates to about RM1.5 billion. We are confident of achieving this goal.
Q: Why is AmBank Islamic focusing on SMEs?
Eqhwan: SMEs are the backbone of Malaysia’s economy. The SME sector has recorded double-digit grow-th over the past few years, which indicates that the potential for growth is tremendous. The government is also placing significant emphasis on the SME sector as we have seen in the recent budget announcement. Hence, we are playing our role to support the government’s SME agenda. In addition, there are various sub-segments within the SME sector such as the halal market, which is a natural fit for AmBank Islamic.
There is an increased demand we are trying to fulfil, which is the provision of syariah-compliant banking solutions. This is pertinent as more and more SMEs in this market are keen to ensure that all the elements of their businesses are syariah-compliant. This is where we can help by providing “halal-preneurs” with an opportunity to obtain end-to-end Islamic finance solutions tailored to their needs.
We are fully cognisant of the need to identify the good SMEs from the onset and we are glad we have a solid SME base to work with, including some merchants we have yet to approach. We are also continuously improving our credit underwriting capabilities. Moreover, we are cooperating with Credit Guarantee Corp (CGC) to mitigate our risks in the SME space.
Q: How is AmBank Islamic supporting e-commerce?
Eqhwan: The nature of competition in trade has been transformed by e-commerce in recent years. Moreover, the pace of market disruption shows little sign of slowing. E-commerce is now an integral part of our lives. E-commerce is a segment that AmBank Islamic sees tremendous potential in. In fact, Islamic banking encourages entrepreneurship and trade while prohibiting usury. In the past few years, we have witnessed the success of young “e-trepreneurs” who venture into merchandising Islamic apparels, cosmetics, and food and beverage.
Our endeavour in digitalising syariah bodes well for this segment as we foresee the need of Islamic banking solutions for this segment, which we can offer via digital space. We look to providing banking solutions not only in terms of financing, but also advisory. AmBank Islamic is keen to work with the government to support the nation’s e-commerce agenda.
Q: How is AmBank Islamic supporting AmBank’s Top Four strategy?
Eqhwan: Firstly, from a segment perspective, AmBank Islamic has identified the Islamic “blue ocean” segments to expand into, which allows AmBank Islamic to further add value to the group. It’s about strategically targeting niche segments, which typically gravitate towards Islamic banking and have not been penetrated by the AmBank Group.
These would be segments such as halal SMEs, e-trepreneurs, Islamic financial planning and public universities. With reference to Islamic financing planning, we wish to take care of our customers with end-to-end solutions. This is not only in terms of will writing, but also to educate our customers in terms of the value proposition of Islamic finance.
The ultimate goal is to provide peace of mind to our customers. We aim to harness the power of digital to pre-screen investment criteria, analyse investments to ensure syariah compliance as well as provide an interactive portal to educate our customers on financial planning, which adopts syariah principles.
Secondly, from a product perspective, we are looking to embark on financial research and development (R&D) to create differentiated products for AmBank Islamic that go beyond the products and services currently offered by both conventional and Islamic banks.
We hope our endeavour will support the nation as Bank Negara Malaysia looks to further develop the Islamic banking industry and cement Malaysia’s leading position in the sector.
We are fortunate to have a supportive and forward-thinking central bank and we are committed to support its vision.
These products, which we are looking to develop via our financial R&D, will be syariah principles-driven. Among the principles we can adopt are Ijarah and Musya-rakah Mutanaqisah. This is, of course, a long-term journey as we would need to be mindful of the intricacies of the market. We shall continuously engage Bank Negara in this endeavour.
We are collaborating with a state government as part of this financial R&D to promote financial inclusiveness, which is also in line with supporting the government’s agenda.
In fact, in respect of financial inclusiveness, AmBank Group is one of the four banks selected to participate in an affordable home financing scheme, as announced in the recent 2017 Budget.
In line with this, we hope that the financial R&D would be successful since its objective is to create new products and services, which would create a new market for us, benefit society while ensuring the integrity of our risk management and syariah compliance.
We hope to be able to launch at least one new product from the financial R&D within the next 12 to 18 months. In order to propel our product strategy forward, we aim to establish an incubator programme by recruiting fresh young minds. We hope these fresh minds will be able to generate new ideas to come up with products that go beyond the products and services that are currently offered by both conventional and Islamic banks.
With this in mind, AmBank Islamic is also building a strong partnership with local public universities to complement the group’s AmGraduate Programme. Last but not least, we are also enhancing our approach in existing market spaces by supporting marketing efforts, and simplification of existing product offerings to our customers, especially to support our clients in the SME space, including for the purpose of contract financing.
We are also looking to support clients that trade internationally and would prefer Islamic banking solutions.