Affin Bank sets a very clear culture: get to the basics of banking and get it right, says its chief
IF INVESTMENT banking is fine dining banking, consumer banking would be teh tarik banking, Affin Bank Bhd's chief Datuk Seri Abdul Hamidy Hafiz joked.
The analogy is undoubtedly graphic but it gets the message across. It is what Hamidy likes to do.
When he was hired to lead Affin Bank in 2003, the bank was not doing well. About a quarter of its loans were not performing then. Now, that has fallen to 6.7 per cent and is set to drop further to below five per cent by the end of the year.
"We brought down our percentage by pure hard work and sending a message to the market very clearly that it doesn't pay not to pay," he told Business Times in an interview.
Hamidy realised that he needed to improve Affin Bank's risk management practices quickly. He conceded that the staff were not well trained then.
So what did he do? The chief executive officer started teaching a voluntary class on credit for his employees. The once-a-week session ran for six months before it was taken over by the chief risk officer.
"This bank, we need people to know credit and we don't compromise. We cannot go back to the old ways. What we're saying is lend good money, monitor our money. It's no different from what we're trying to tell everyone, would you lend your money. "In the pursuit of interest, you do not give away principal," he said.
Hamidy knows banking well. The 51-year-old worked with Standard Chartered, a UK-based bank, for more than 12 years before making his mark in local banking circles.
He then joined the Amanah financial group, working with Datuk Azman Yahya. Azman brought Hamidy with him when he led Danaharta, a government agency that bought bad loans from banks hurt by the Asian financial crisis in 1997/98.
The success of Danaharta led to Hamidy's appointment at Affin Bank.
"Before 2002, we were always labelled with high NPLs (non-performing loans). Now, other than Danaharta, we are probably the most successful bank in turning around NPLs," he said.
Affin Bank has a recovery rate of about 60 per cent. Some 60 per cent of its bad loans are from companies and the rest are retail.
"Corporates, we have more or less all put on a timeline and waiting to recover. It's at the tail end but we do not depend on our recovery for profit," Hamidy said.
He felt strongly about institutionalising the credit process at the lender. If a robust system is at work, the bank would be protected against bad loans and it would be able to get good ones coming in.
Two years ago, Affin Bank set a new zero NPL policy. Executives whose accounts turn bad will have to face a committee chaired by Hamidy.
"Any new NPL above half a million (ringgit), the person with that will come before a committee chaired by me and you don't like to come before me.
"We treat it as a very big sin in the bank. I don't care if you are in Kota Kinabalu, we will fly you in. Let me tell you, you get grilled. We put you on your toes. When you lose money in this bank, we hammer you," he said.
The policy has worked. New NPLs are below one per cent of new loans.
"The bank sets a very clear culture. Get to the basics of banking and get it right. Our cost-income ratio was 70 per cent, now its 45-46 per cent. Our capital was the weakest, now it is at 13.6 per cent, above average in industry. We did not put in a cent from eight per cent.
"We only ask (for fresh capital) after we have proven that we can deliver. The group has indicated that they're ever willing to come in (with fresh capital)," Hamidy said. - By Shahriman Johari