THERE has been much speculation of late that Tan Sri Azman Hashim, founder and chairman of AMMB Holdings Bhd, is looking to sell his 12.97% equity interest in the country’s fifth largest banking group by assets.

A potential stake sale could spark yet another merger in the local banking sector. Two months ago, in a move to quash the rumours, AMMB released a press statement saying neither Azman nor its largest shareholder ANZ (Australia and New Zealand Banking Group Ltd) was engaged in talks with other parties to sell their respective stakes.

Still, the rumours remain persistent in banking circles. This is partly because of the expectation that a proposed merger of CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd, first mooted in July, will kickstart a fresh round of consolidation in the industry following a three-year slumber.

In an exclusive interview with The Edge, Azman, 75, reveals that he is keeping an open mind about things. He acknowledges that a stake sale is something he has to think about as he gets on in years and as none of his children are in the business.

“At the end of the day, I guess I’ll have to think about that because I don’t have anybody coming up after me. I don’t have my family in the banking group at all. But I never think about retiring, that’s the problem!” Azman, still as active, energetic and sharp as ever, says with a laugh. “I should, I suppose … so, you know, it’s open.”

Any decision on his stake will take into account what is good for the bank. “What is good for the bank means good for the shareholders as well,” says Azman.

Azman is still actively involved in the running of the group. “I am spending the same amount of time or most of my time in the banking group — very hands on,” he points out.

His stake in AMMB, held through Amcorp Group Bhd, is valued at RM2.51 billion based on last Thursday’s closing price of RM6.42 a share. He is currently the third largest shareholder in AMMB after ANZ (23.78%) and the Employees Provident Fund (14.35%).

According to recent news reports in Australia, ANZ has been looking to either divest some of its minority stakes in Asian banks to avoid extra capital charges under new Basel III rules, or raise its minority positions to full control.

Asked if ANZ has indicated that it is looking to sell its 23.78% stake in AMMB, Azman says: “No, not to me. They have been here for many years. It’s a long-term partnership and we are supposed to be one of the best partnerships they have overseas.”

Would ANZ want to raise its stake then? “Yes, that is possible, but that depends on the regulator (Bank Negara Malaysia). I think for foreign investors in banks, that is always their ultimate aim … to increase their shareholding.”

Australia-based ANZ, which emerged as a strategic partner in AMMB back in May 2007, also has a 39% stake in Indonesia’s PT Bank Pan Indonesia Tbk (Bank Panin), for which it has reportedly hired an investment bank to look for buyers. Apart from that, ANZ has a 20% stake in Shanghai Rural Commercial Bank Co Ltd and 17.6% in Bank of Tianjin Co Ltd, among others.

Merger with Maybank?

Azman says AMMB is fully focused on trying to improve its performance and is stepping up efforts to gain market share in the competitive marketplace. The Malaysia-focused group is not distracted by the recent merger developments in the industry, he insists.

“We are pushing forward on our strengths. We have spent a lot of effort and made substantial investments in impressing our capabilities [over the last two years] and are ready to go faster.”

But as the operating landscape gets tougher and with banks starting to consolidate to build size and venture into overseas markets, can AMMB continue to go it alone or will it join the consolidation game?

Analysts say should Azman and ANZ be looking to give up their stakes, top lender Malayan Banking Bhd (Maybank) is likely to be interested. Apart from being seen as one of the better fits for AMMB, Maybank also has an additional reason to seek a merger — it will lose its long-held position as the country’s largest banking group by assets if the CIMB-RHB-MBSB merger comes to fruition.

Maybank CEO Datuk Abdul Farid Alias has nevertheless said it will not acquire another bank just to maintain its top spot, pointing out that any acquisition must enhance its shareholder value.

Azman, when asked what he thinks about a potential Maybank-AMMB pairing, says: “At the moment, no thoughts about that.” He laughs good-naturedly when it is suggested that it would be a homecoming of sorts for him if there were to be such a merger, given that it was in Maybank that he had his start in banking (see side story).

Maybank ran into some turbulence in the late 1960s and Bank Negara put Azman, a chartered accountant, there as a non-executive director for about five years to help sort out its problems. He was eventually made an executive director in 1971.

“I was there 10 years, from 1971 to 1980. That was during the most formative years. It was the first local bank to introduce computer systems … it was a big deal, you know (laughs). I was the one who initiated the competition for the design of the head office building. Many branches opened. We started the merchant bank — Aseambankers, in those days, we started the insurance company, credit cards. So interesting. The growth was fantastic. I really enjoyed it. It gave me the exposure, experience and confidence to run my own bank [later],” he recalls.

For sentimental reasons, would he be keen on a Maybank-AMMB merger? “At the moment, I’m just looking at making the bank [AMMB] perform better,” he answers.

Driving force

Azman founded Arab-Malaysian Merchant Bank Bhd in 1976. He then built it into what is now known as AmBank Group. He has been the driving force behind the group’s successes over the years.

Its 38-year journey, however, was not without headwinds. Azman recalls the lowest point in his career, when the banking group was nearly swallowed up by the Affin Group due to the government’s move to consolidate banks during the 1997/98 financial crisis.

“The bank was hit. This was because two years before that, we finally got the last part [that we needed to become a] financial supermarket — we bought a commercial bank, at market price as per all our acquisitions. After we bought it, we had to make sure we were making money out of it … so we dished out loans, mostly corporate loans. [And the] worst-hit sector during the crisis was corporate loans. That was the worst time.”

The bank’s share price nosedived to about RM1 from between RM24 and RM26 a share. Azman was hit not just as a banker but also as an entrepreneur and borrower.

“Imagine what happened to me. All my assets went out the window. All the banks were very hard. Some foreign banks were hard and rude … the way they treated people was very bad. So, I can understand how borrowers feel when they are hard-pressed. And of course … the part that was really bad was when under the banks’ consolidation, we were supposed to be swallowed up by Affin Bank. Just imagine, AmBank would have disappeared! But we made a turnaround immediately … so quick … in one year!” he says.

The group fell into the red, incurring a net loss of RM426.6 million for its financial year ended March 31, 1999. It returned to the black just a year after that, registering a net profit of RM209.3 million in FY2000. It then continued making profits every year except for FY2007 when it incurred a net loss of RM282.5 million due to a significant one-off prudent provisioning charge it made to build up its loan loss coverage for long outstanding non-performing loans.

Following its escape from being “eaten” by Affin Bank in 1997/98, it began strengthening itself to become a solid independent banking player. In 2012, AMMB acquired Kurnia Insurans (M) Bhd and MBF Cards (M) Sdn Bhd to support the growth of its non-interest income.

Today, the group, which once focused mainly on auto financing and investment banking, has evolved into a more diversified universal banking group, with bottom lines crossing the billion-ringgit mark.

The entry of ANZ in 2007 helped boost the group’s product base, strengthened its business policies and improved its asset quality. AMMB’s group managing director, Ashok Ramamurthy from ANZ, took over the reins from veteran banker Cheah Tek Kuang in 2012.

Azman says the group will continue to stay focused on the local market despite its rivals

going increasingly regional. “That’s partly because of the partnership with ANZ [which already has a regional presence through its stakes in Asian lenders]. But there is nothing to stop us from going overseas, for example, in Islamic banking and investment banking.”

The big question is, will Azman still be with the group when it ventures into its next stage of growth?

Below are excerpts from the interview:

The Edge: What is your view of the CIMB-RHB-MBSB merger that is in the works?
Tan Sri Azman Hashim: I think it’s good. If you want to be going regional and have the power and size to be going regional, then you have to have this kind of merger. It’s good.

People have different views on whether the EPF should be allowed to have a vote on the merger. Your view?
Personally, I feel the EPF should be allowed to vote. The EPF is the biggest investor on the stock market and is a substantial shareholder in most of the companies. So, denying it the vote seems unfair. The EPF should have the ability to protect its investments.

What are your thoughts about the current banking consolidation and in your opinion, how different is it from the previous round?
Previously, there were 30 over banks. And then consolidation came in 1998/99 and we were supposed to be swallowed by Affin Bank. I don’t understand why. But anyway, thank God and Tun Mahathir — from an intended six anchor banks it became 10. So, we remained part of the 10. That was the first consolidation exercise. Now, we have eight banks, and with this current merger, it’ll be even less.

But let me say this. From the customers’ point of view, my own experience is that they prefer to have choices. In fact, with too few banks, you’ll have a problem because for customers, for the businessmen, they have less banks to approach. So, I think, we need to have medium-sized banks also, like us (AmBank).

You know, during the Asian financial crisis of 1997/98, I was much affected personally not just at the bank but more as an entrepreneur and borrower. Then, you could see how the banks worked. It’s the foreign banks — some were terrible. I had experience with two. I was looked down upon and treated rudely. During a crisis like that, their head office just said, ‘cut credit to this and that sector’, and it was done ... there’s no sentiment and no matter what you’re doing to improve, they cut. We are a Malaysian bank, and we try to understand the people and circumstances.

Because I was personally affected, I understood completely what was happening and the situation. Many of the reasons for the crisis were beyond our control, caused by foreigners attacking our currency and the stock market. So, we accommodated many of the Malaysian companies.

You need to have domestic banks, and not too few, because especially in times of crisis, the borrower needs to be able to go to the bank, talk to them face-to-face — this is what we did for others. And many are thankful to us because we took them up during the crisis.

So, I’m not so sure we should have, for example, just three or four large banks. I think there’s room for a few of the not-too-bigs. You get too big also, you can get very impersonal ... like international banks. Then it becomes difficult to maintain the personal touch, which is important to me. So, in Malaysia, there is space for banks like us.

Down the line, could there be a potential partnership for AmBank with another bank?
I think we have to keep an open mind. I would say I’d keep an open mind, because the situation changes. We’ll see how it is. In the end, what is good for the bank is what counts.

Also, the mega merger is not completed. Integration is not an easy thing, you know. We also had some exercises integrating with MBf Finance, with Kurnia Insurans. It’s a big exercise, and we take two to three years at least to settle down, so we have to see what comes up with it. So, the environment might change, the situation might change. In fact, when integration takes place, usually the banks are so involved in it that it’s difficult for them to really be aggressive in the marketplace. They’re so busy trying to integrate their systems, their people ... we know about the problem. So, this is the time for us to improve our performance and get more market share.

With the three banks now busy with the mega merger, is AmBank stepping up its efforts to gain market share?
That is a normal process. In other words, all the banks do that all the time anyway. But maybe with the integration process going on, we’re still doing the same thing, but there’ll be a bit less competition perhaps ... (laughs).

This article first appeared in The Edge Malaysia Weekly, on December 15 - 21, 2014.

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