KUALA LUMPUR: AGROBANK, formerly known as Bank Pertanian Malaysia Bhd, has begun its new phase following its transformation into a full-fledged Islamic bank in July 2015.
President and chief executive officer Datuk Wan Mohd Fadzmi Wan Othman said the worst might be over but the future was not without its challenges given the high-risk nature of the agriculture industry.
In an interview with NST Business, Wan Fadzmi, the man behind Agrobank’s transformation, said the bank might have been around for 47 years since 1969 but the story was just beginning as it wrote a new growth chapter.
Wan Fadzmi, who joined the bank in 2011, holds the distinction of being the second “outsider” to be parachuted into the bank after former managing director and central banker Ibrahim Hassan.
His status as an “outsider” did not make things easy, but his 15 years of experience in financial hubs such as London, New York and Hong Kong, as well as being a banker for Malayan Banking Bhd (Maybank) gave him the added advantage that most of his peers in Agrobank did not have.
“I was not without reservations when I was approached to join the bank in 2011. At that point, its non-performing loan (NPL) was at 24.7 per cent, which from a commercial point of view was ridiculous. When I left Hong Kong, my NPL was 0.02 per cent. In fact, wherever I work, my NPL was always below one per cent, so yes, I did have my reservations,” said Wan Fadzmi.
“Alhamdullilah, I had friends and when I took this job, I set some conditions that I must be allowed to bring my own people and that the board must give me a mandate to do things my way. There was a lot of resistance when I came in, so I had to gain their confidence and trust. That was tough.”
Wan Fadzmi assembled a team consisting of those he worked with in Maybank and RHB Banking Group and came up with a plan to generate income and growth as well as long-term sustainability.
“We were getting a lot of income but it was non-recurring, based on sales of assets. Even the central bank knew it was not sustainable.
“I engaged with all stakeholders and asked the Finance Ministry to give me one year to do this without outside interference. They agreed.”
The gamble paid off. Six years down the road, the bank’s NPL is at just at six per cent.
The bank enjoyed continuous growth. Most distinctive was its growth of 16.4 per cent as of the end of last year, smashing its 10 per cent target.
“Looking at our balance sheet in terms of growth, you can see there is an upward trend. In 2014, we hardly had any growth, but in 2015, six months after becoming a full-fledged Islamic bank, we experienced some seven per cent growth. As of the end of last year, after operating as an Islamic bank for a full year, we charted a 16.4 per cent growth. This was above the industry average.”
Wan Fadzmi first outlined Agrobank’s transformation into a full-fledged Islamic bank in 2013.
The transformation was “ambitious and aggressive”. It was needed to bring back to the bank’s objective which was to serve the agriculture segment of the country.
Agrobank is mandated to support the agricultural sector. Only a maximum 30 per cent of its business is allowed for non-mandated portfolio.
“Unfortunately, after we were corporatised, we veered off our mandated objectives.
“When I came in 2011, close to 60 per cent of our business proceedings was not mandated, the NPL was bad, turnaround time was bad, the outcome wasn’t there and the execution was flawed. We were good at planning but not good at execution. I knew this had to change.”
According to Wan Fadzmi, 50 per cent of the bank’s products were already Islamic in 2011. The challenge was converting the rest of the conventional legacy assets into Islamic.
“We set a baseline of three years to convert to Islamic, which was very aggressive. We set the transformation plan and we were very strict on the execution.”
He now wants Agrobank to grow about 10 per cent each year to achieve a market share of 33 per cent in primary agrofood by 2020, which is the bank’s core mandate.
“We are at about 27 per cent right now. We are targeting 300 more agents this year, and we already have some 400 agents. It is achievable. My strategy is, whatever I open has to be 100 per cent active, otherwise the quality drops. I do not want quantity, I want quality. I don’t go for volume or market share, but deliverables.”
Though he is well aware that the banking industry is in the midst of financial technology push, Agrobank will not be downsizing its brick and mortar business anytime soon given its core rural clientele.
“When I came in 2011, there was no e-banking at all. Now up to the end of last year, we have spent some RM15 million on this.
“I must stress that investment in the technology front is ongoing.”
Wan Fadzmi said his next focus was to keep the momentum going and ensure the legacy of Agrobank continued.
“We will be hitting our 50th anniversary in 2019 and I keep telling my people that I want this bank to be around for another 150 years. So I want to focus more on strengthening the human capital, integrity, personal values, commitment that should be the core and DNA of our bank.
“What I want people to know is that we are beyond numbers and that’s what differentiates us from commercial banks,” he added.