THIS is an excerpt of an exclusive interview with Agrobank president and chief executive officer Datuk Wan Mohd Fadzmi Wan Othman.
Question: You were brought into Agrobank in 2011 to help shake things up. What were the challenges?
Answer: I came back then after being abroad for 15 years. I was attached to Maybank Group Bhd. Maybank, by the way, is the best training ground for those in the financial sector. Many captains of the industry came from there.
When I came to Agrobank, its non-performing loan (NPL) was at 22.7 per cent, which was ridiculous. When I left Hong Kong, the NPL was 0.02 per cent. In fact, wherever I worked, the NPL was always below one per cent.
When I took this job, my conditions were that I must be allowed to bring my own people and the board should give me the mandate to do things my way.
There was, of course, a lot of resistance as I was an outsider, so I had to gain their confidence and trust. That was tough. But since the board at the point was also new, we could work together.
There was a lot of pressure. We were getting a lot of income but it was non-recurring and it was all based on sales of assets. I engaged with all stakeholders and asked Finance Mi-nistry to give me one year to do it.
The new team, made of people I worked with in Maybank and RHB, put up a plan that was very ambitious. Ambitious because we were all commercial bankers. We were trained to continuously generate income and growth. However, the case differed here because the bank needed to also serve its mandate — some of which were not growth-driven.
Q: You were instrumental in converting the bank into a full-fled-ged Islamic bank in 2015. How did that come about and how difficult was the conversion?
A: My then “head of transformation” and I came with the plan for the transformation and to re-shift our objectives back to the mandates. There was no push from the stakeholders, we just thought that it was a natural progression.
In 2011, we already had Islamic products while operating as a conventional bank. In fact, 50 per cent of our products were already Islamic, so we were already in good standing, but the remaining 50 per cent was conventional and these were mostly legacy assets. So, we set a baseline of three years to convert to a full-fledged Islamic bank, which was very aggressive.
Q: What were the biggest changes since converting into a full Islamic bank?
A: The beauty of us converting in July 2015 was that I had six months of conventional and six months of Islamic balance sheets to look at and the differences were apparent.
Looking at our balance sheet in terms of growth, you could see an upward trend.
In 2014, we hardly had any growth, but in 2015, six months after conversion, we experienced seven per cent growth. As at the end last year, after operating as an Islamic bank for a full year, we charted 16.4 per cent growth, far smashing our target of 10 per cent. This was also above industry average.
Q: What are your plans going forward?
A: We have a Strategic Planning Team. For the 2015-2020 growth phase, a major portion was dedicated to technology. I think, judging from what we have spent, and this is coming from 2011 when there were no funds allocated or technology at all, we have a presence in financial technology now.
What you see in the commercial banking space when it comes to technology push, we have it too. Five years ago, we only had automated teller machines and cash deposit machines, but now we have more.
I am not saying that we want to be the first movers. Let the bigger banks be the first movers and we will come later. We can learn from their mistakes and keep our cost as minimal as possible.
Right now, we are in the process of consolidation and I am studying more areas of growth for us and some other areas that need a rework. I am focusing on human capital as I want to build the talent pool. I want to focus on the people and work on a sustainability plan with the best people around.
We will be hitting our 50th anniversary in 2019 and I keep telling my people I want this bank to be around for another 150 years.
I want this bank to be around long after we are gone. So, I want to focus more on strengthening the human capital — things like integrity, personal values and commitment — and that should be the core and the DNA of our bank.
Q: What are your strategic targets for this year?
A: We have some 400 agents already and we are targeting 300 more. It is achievable. My strategy is whatever I open has to be 100 per cent active, otherwise the quality will drop. I do not want quantity, I want quality.
I don’t go for volume or market share, but deliverables.
This year, we want to grow 10 per cent overall.
In our plan, by growing 10 per cent annually between now and 2020, we will be able to achieve a market share of 33 per cent in primary agrofood by 2020, which is our core mandate. We are at about 27 per cent right now.
Q: What are your expectations of the agriculture industry, given the ongoing economic volatilities?
A: From a macro-economics story, we are still very sustainable because we are in the food business. Come rain or shine, people will need food. Other sectors like luxury goods and property are cyclical, and last year, the banks suffered because mortgages were down.
Most banks are heavily in retail and last year was a bad year for retail, and I feel that trend will continue this year.
The agriculture industry is a very high-risk segment. You have to deal with elements of weather, diseases, machineries and such things. That’s why banks shy away from agriculture.
Commercial banks can balance their portfolios using other segments, I can’t do that because I am mandated to allocate 70 per cent of my books for agriculture, which has higher risk than manufacturing and property; so their risk portfolios look good. I do not have that luxury.
Agriculture is a long term business, and banks need to be there in the long term in this business.