Smallish lender is confident it can punch above its weight with the right strategy
THE AmBank Group used to be a big name on the investment banking front decades ago but these days, people seem to have forgotten that it was the poster boy for corporate deals then.
In the 1980s and for most part of the 1990s, it was possibly the only local bank to have its investment banking segment – instead of commercial banking – drive its overall business, unlike most of its counterparts.
But post Asian Financial Crisis (AFC), the lender found itself over-leveraged and as a result, its core business suffered and competition began.
Today, the group’s investment banking business housed under AmInvestment Bank contributes just between 8% and 10% to its overall net profit.
Still, things have improved considerably since the early post-AFC days.
After an obvious and longish lull, the banking group – the third smallest among eight in the country – says it has regained some of its shine and is now top three in certain areas of investment banking.
To be sure, there are only five main players which take up about 90% of business in the market.
Nevertheless, there’s been progress and such an improvement is largely in line with the lender’s bigger-picture transformation strategy in wanting to be among the top four lenders in the country by 2020.
“AmInvestment is already top three in many of the areas within investment banking such as fund management, the intention is to achieve this in all areas of business for investment banking,” says AmBank group CEO Datuk Sulaiman Mohd Tahir.
More specifically, the lender wants to grow in a big way especially its fund management and private banking businesses, he adds.
AmBank’s fund management and private banking businesses have assets under management (AUM) of RM45bil, which is not too bad, given the bank’s overall size.
Larger rival CIMB GROUP HOLDINGS BHD, for instance currently manages over RM54bil.
“Our wealth management business via fund management and private banking hold much potential considering that wealth is growing in Asia,” AmInvestment Bank CEO Seohan Soo tells StarBizWeek in a joint-interview with Sulaiman.
Soo says Malaysia is no different given that wealth accumulation is “quite considerable” here and wealth management “is a high-growth business”.
“I think the perception of the bank not being top three (in some areas) may be due to the fact that we have not been doing a good job in publicising ourselves,” he quips.
That said, Soo admits that the market here is “quite small” and “in order to survive, we have to be top three”.
“Right now, we are very much institutional-based. The plan is to do more retail,” he says.
In terms of corporate finance, AmInvestment’s focus is the merger and acquisition (M&A) business as well as mid to large cap initial public offerings (IPOs).
“Our target is to be a key player in merger and acquisition advisory and financing.
“Essentially, we may run on a comparatively smaller engine, but with the right strategy, we can punch above our weight.”
Soo says the bank is expecting to be part of “a few large IPOs” soon – two of which are expected to be launched by the end of this year or early next year.
To this end, it is targeting for its investment banking business to contribute between 15% and 20% of total net profit, going forward.”
Unnecessary to go regional
Unlike its counterparts like CIMB and Maybank Investment Bank, AmInvestment is not a regional player and it operates from its offices in Malaysia.
Sulaiman, a former CIMB banker, believes that one doesn’t need to be a regional outfit to do well in investment banking.
Instead, partnerships with international fund houses are more strategic, he says.
Having a branch presence (regionally) will not make much of a difference when you are looking at institutional investors for instance, he points out.
“We have the capability to bring international fund houses to invest in Malaysia so it is more of a fund house play rather than a regional play for us,” he says.
Soo who coincidentally also used to work with CIMB, points out that while AmInvestment’s competitors have regional presence, it is able to deliver “similar P&L” while operating solely in Malaysia.
“To excel in the investment banking sector in Malaysia, specialisation is key. If you are specialised, you get rewarded better and you don’t have to compete on pricing.”
He says the lender’s key strength lies in the institutional business with around 85% of its fixed income business coming from institutional investors.
“We command the largest volume of foreign institutional trades and have in place a specialised team that handles only foreign institutional investors.”
Sulaiman says investment banking has been AmBank’s mainstay from its origination, all those years ago.
“We cannot lose ground in investment banking.”
Below are excerpts of the joint-interview.
How do you attract retail investors?
Sulaiman: We are very strong with institutional investors and want to use that advantage that we have to see how we can proliferate retail as well.
To do that, we recognise the need to build linkages and have synergised our offerings in terms of private as well as priority banking.
If you look at our wealth management side for the retail segment, we used to sell RM20mil a month three years ago, now we sell RM100mil or more a month in terms of unit trust and investment products.
What are the prospects for the investment banking sector?
Sulaiman: We are positive about the prospects ahead for Malaysia particularly with the current administration.
Malaysia is a leader in infrastructure financing. By next year we expect to see an uplift in terms of bonds and the equity market.
Soo: We offer multi-platform access to manage customers’ investments anytime, anywhere, at their convenience. This will allow us to target the younger retail investors. For our fixed income business, we are targeting 15% to 20% market share for bonds. Currently we are at 16%.
Cumulatively we have listed 251 entities on Bursa Malaysia with more in the pipeline. We are bullish about the future of the market.
How is the progress of your transformation journey?
Sulaiman: Reported net profit for the year dipped to RM1.1bil due to one-off expenses related to strengthening overall operational efficiency to create a more resilient AmBank for the long-term.
The initiatives, combined with expense-reduction measures which we undertook during the year, would benefit the group.
In just two years into our transformation programme, we are seeing encouraging underlying growth.
Our focus remains to strengthen our key business while building on our strong talent pool to enhance prospects.
We are seeing some very good results through our business units and we have confidence to sustain this momentum.