Saturday June 30, 2012
Exim Bank’s transformation story
By DALJIT DHESI
EXPORT-IMPORT Bank of Malaysia Bhd (Exim Bank) is on an expansion mode and set to position itself as a preferred bank for Malaysian export oriented businesses.
This has not been an easy task as the bank had undergone drastic transformation to arrive at where it is today.
The person behind the tranformation journey is none other than its managing director and chief executive officer Datuk Adissadikin Ali (pic).
Adissadikin is no stranger to turning around a company's business as he was previously with Pengurusan Danaharta Nasional Bhd. He subsequently joined Bank Islam and then Exim Bank, with the aim to put these financial institutions on the profitability trail.
After a stint with the management team that successfully turned around Bank Islam, he was tasked by the Finance Ministry to put Exim Bank's house in order.
The transformation journey of Exim Bank began in 2008 when he joined the bank as its chief operating officer. He became the CEO in 2010.
“With non-performing loans (NPLs) creeping up, a new management team was brought in by the Government to rectify the situation. This involved a total overhaul of the previous management and board. The first thing we did was to put in place the “3Ps and one T” as part of its corporate improvement programme (CIP) towards improving efficiency while managing cost effectively, he tells StarBizWeek.
The three Ps stands for processes, procedures and people while T stands for technology. This was apparently lacking in Exim Bank, he adds. The processes, he says, should be benchmarked against the industry's processes to ensure effectiveness and efficiency.
Although a company's processes are in line with industry standards, nevertheless in the absence of effective procedures there is no proper system and governance in place.
There must also be the optimal size of people and with the right competency and the technology to support business growth, he says, adding that without this as in the case of Exim Bank, the NPLs had shot up. In 2009, the bank's NPL stood at close to 43% in 2009, 50% in 2010 and decline close to 35% in 2011.
Adissadikin says that when he first joined the bank, he realised the NPLs would trend higher as project loans (with a tenure of seven years offered by the bank) tend to be lower in the first two years due to the payment of interest without the principal sum. When the principal sum is due, he says NPLs tend to spike and this is where the actual problem sets in.
“What we did to address this was ring fence' the NPLs and identify which was salvagable and can be restructured. But those where there was no hope of salvaging, we took the legal route of recovery that involves foreclosure of collateralised assets and other means of legal action. In 2010, the NPLs hit the roof and we did a kitchen sinking exercise which involved close to RM300mil losses. After this, in 2011, the bank returned to the black with a net profit of RM176.3mil,” he says.
To build a quality asset portfolio and sustainable business, the bank implemented a revised business model. In doing so, it tightened its lending criteria by ensuring a more robust risk management framework for loan approvals.
Applicants, he adds, are now assessed against more stringent performance and payment risk criteria to ensure the repayment capacity of their business operations. There was an 80% improvement in the number of loan applications, rising from 107 cases in 2010 to 193 cases in 2011. A total of RM4.7bil worth of loans were approved. Total disbursement increased to RM1.2bil from RM0.5bil in 2010.
With the right model in place after reducing its NPLs, Adissadikin says the bank is confident of meeting its target growth of 20% year-on-year for its loan book. It is targeting loan disbursements of between RM1.8bil and RM2bil this year and is upbeat the target is achievable as loan disbursements have hit RM1.5bil in the first six months of this year.
After putting the house in order, he says the next thing will be to achieve a sustainable business growth and enhance its presence globally and which the bank is on track to do so.