CIMB Group Holdings Bhd’s Datuk Sulaiman Mohd Tahir will join rival AMMB Holdings Bhd — the country’s fifth largest banking group — as its new group managing director once Bank Negara Malaysia gives its go-ahead, sources say.

CIMB Group last Friday announced that Sulaiman, 52, had resigned from his positions as CEO and board member of CIMB Bank Bhd, its consumer bank. Sulaiman, who has been with the group for 25 years, is now on gardening leave and will officially part ways with the country’s second largest banking group on Nov 22.

“It is only once he has resigned that AMMB can formally apply to Bank Negara to have him approved as the group managing director. It normally takes about two months for Bank Negara to process [such applications]. Technically, he shouldn’t have difficulty passing the ‘fit and proper’ tests given the [previous] positions he held at CIMB,” one of the sources tells digitaledge Weekly.

An AMMB spokesman declined to comment when contacted.

The group managing director post at AMMB has been vacant since Ashok Ramamurthy officially stepped down on April 1 to return to Australia to take on a senior executive role at Australia and New Zealand Banking Group Ltd (ANZ). ANZ is the single largest shareholder in AMMB with a 23.78% stake.

AMMB then appointed his deputy, Datuk Azmi Mahmood, as the acting group CEO. Azmi has been with the group for over 30 years.

Sulaiman had held the position of CIMB Bank CEO only since May 1 this year. He was appointed after a decade of serving as the head of the consumer sales and distribution division. An accounting graduate, he joined the group in 1987 and had held various positions, including as head of its credit card centre.

“We respect Sulaiman’s decision to move on. Sulaiman has been instrumental in the growth of our consumer franchise and has contributed significantly to the CIMB success story. We thank him for his efforts and wish him well for the future,” CIMB Group CEO, Tengku Datuk Zafrul Aziz, said in a press release announcing Sulaiman’s resignation on Aug 21.

He said the group has already started the process of identifying the next CEO for CIMB Bank. For the interim period, it appointed chief financial officer Shahnaz Jamal as the person in charge of the bank.

Meanwhile, the upcoming new leadership at AMMB comes as the group is going through one of its most challenging times. Competition and capital requirements are getting increasingly tough even as the economy slows, making it harder for a mid-sized domestic-focused bank like AMMB to grow earnings at the pace it used to.

“AMMB needs a clearer focus. Sulaiman, if appointed, needs to galvanise the troops and come up with a clearer direction for it. He needs to improve its market shares,” remarks a banking analyst.

It didn’t help AMMB when the Wall Street Journal reported early last month alleged transfers of up to US$700 million from entities linked to embattled state-owned 1Malaysia Development Bhd to Prime Minister Datuk Seri Najib Razak’s personal bank accounts in the AMMB group. (Najib says the funds were not for personal gain, while the Malaysian Anti-Corruption Commission has said that the RM2.6 billion deposited into his accounts were from Middle Eastern donors whose identities it could not disclose.)

AMMB’s management, in mid-July, held a conference call with analysts to assure them and investors that it had sound corporate governance and strong internal controls in place to ensure compliance to rules.

AMMB started off its current financial year ending March 31, 2016 (FY2016) on a relatively weak note. Its underlying net profit for the first quarter — up by just 3% to RM340 million (excluding one-off divestment gains in the first quarter a year ago) — came in below analysts’ expectations. Net lending fell by 1.8%. Analysts were particularly concerned about the significant dip in its margins.

Its net interest margin (NIM), the difference between the interest it pays on deposits and what it earns from loans, fell by 33 basis points (bps) to 2.11% for the first quarter ended June 30 from the same quarter a year ago, and by 21bps from the previous quarter.

“The squeeze in NIM has been more severe than expected,” banking analyst Julian Chua of Nomura Research says in an Aug 19 report following the release of AMMB’s first quarter results. He had expected a 15bps drop in NIM on a year-on-year basis — not 33.

The drop is partly due to its ongoing moves to reduce its exposure in the risky but high-yielding automotive loan segment, in which it is a major player.

“The NIM decline is part of a trend which began in early 2014 when management decided to reduce the low-income household exposure in the auto loan segment. Auto finance, which used to account for 31% of total loans in FY2013, now makes up 26%. This de-risking of the portfolio has had a knock-on effect on group margins,” says Chua.

Compounding this is the fact that AMMB has been reducing the duration of the fixed income securities it holds to shorter-tenure but lower-yielding ones, in anticipation of volatility in the fixed income market.

“From a margins perspective, the decline in AMMB’s NIM has been much more dramatic than its peers’,” observes another banking analyst. AMMB guided for a 15bps to 20bps compression in NIM for the full year.

The relatively weak first quarter results prompted a slew of earnings cuts and target price downgrades from analysts, although most still maintained their “hold” calls on the stock. Bloomberg data shows that of 24 analysts that track the stock, 16 had a “hold” call, while its 12-month target price was RM5.40. It closed at RM4.67 on Aug 21.

This article first appeared in digitaledgeWeekly, on August 24 - 30, 2015.